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Annual report of the North Carolina Office of the State Auditor : accountability, integrity & reliability

Annual report of the North Carolina Office of the State Auditor : accountability, integrity & reliability

Honesty • Integrity • Professionalism
2007 Annual Report & 2008 Strategic Plan
North Carolina Office of
the State Auditor
Lesl ie W. Merritt, Jr., CPA, cfp
Increasing Efficiency...
Exposing Fraud.
Increasing Efficiency... Exposing Fraud
3 Message from the Auditor
4 2008 Strategic Plan
8 Executive Summary
10 Investigative Division
18 Management Services &
Nongovernmental Compliance Division
21 Performance Audit Division
25 Information Systems Audit Division
27 Financial Audit Division
29 General Administration
32 Appendix A
39 Appendix B
40 Contact Information
Contents
Annual Report 2007 | Contents Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Message from the Auditor
The Office of the State Auditor ( OSA) has been labeled “ the taxpayers’ watchdog,” and with good reason. North Carolina’s Constitution requires the State Auditor to proactively evaluate State agencies in terms of the efficiency and effectiveness of their use of public resources. North Carolina General Statutes expand on this mandate and commission the State Auditor to determine whether programs effectively serve the legislative intent, and investigate allegations of “ misfeasance, malfeasance or nonfeasance” of those receiving State money.
I take these powers and responsibilities as a serious charge in the fulfillment of my role as State Auditor. Building on last year’s efficiency gains, I have appointed an experienced senior auditor into a Quality Control position to ensure that OSA delivers audits and reports with efficiency, expertise and consistency. Financial audits, which comprise the bulk of the work we do, provide accurate “ input” measures but lack a function to measure “ outputs,” i. e., a program’s performance. To fully measure the “ efficiency” and “ effectiveness” of the State’s use of public resources, personnel have been repositioned in a risk- based realignment to areas of growing risk such as the need for more scrutiny over the State’s grants to non- profits, and the measuring of actual “ bang for your buck” performance of ambitious State programs and entitlements.
Central to OSA’s mandate as “ the taxpayers’ watchdog,” we are focusing on our Investigative Division and the State Auditor’s Hotline in 2007 and 2008. With the new head of our Investigative Division possessing federal law enforcement experience, we are building an Investigative Task Force ( ITF) comprised of auditors and staff from Investigative, Performance, Nongovernmental Compliance, Financial and Information Systems divisions. Armed with the mission to investigate fraud, waste and abuse of State resources, the ITF will scrutinize the “ money flow” through State agencies and programs and will steer their focus towards areas of “ high risk” for such fraud, waste and abuse. Acting as a channel through which local citizens’ tips will flow to the ITF, the OSA will promote the State Auditor’s Hotline in carefully targeted public service announcements on television. Current plans are to concentrate on media markets that contain high concentrations of State employees who would logically be the most knowledgeable about fraud, waste or abuse of State resources.
The OSA has a critical mission in the functioning of State government. I recognize that the foundation upholding these powers is the responsibility to our taxpayers to fairly, consistently and independently evaluate State government’s use of public resources. Clearly, the Auditor’s powers are derived from State statutes and the Constitution, but the Auditor’s responsibility to the people arises out of being independently elected and entrusted to ensure their tax dollars are properly spent.
Sincerely,
Message from the Auditor Increasing Efficiency... Exposing Fraud
The Office of the State Auditor occupies a unique position in State government. The North Carolina Constitution, State statutes and the public trust require and expect the OSA to fairly, consistently and independently act as “ the taxpayers’ watchdog.” This strategic plan describes how OSA will perform this watchdog function in 2008.
Investigative Division
If the OSA is the taxpayers’ watchdog, then the Investigative Division is the watchdog’s keen sense of smell. Through citizens’ tips fed to the OSA through the State Auditor’s Hotline, the Investigative Division detects and exposes fraud, waste and abuse in State government.
In 2008, the Investigative Division will operate under new leadership. Building on the fine work done in the past, the new Director will use his professional experience to take investigations in a new direction. With his experience in investigating white collar crime such as political corruption and financial fraud for the FBI, and experience in identifying conflicts of interest and accountability issues for the State Ethics Commission, the Division will be able to discover new leads and open more doors inside and outside State government.
Investigative Task Force
Building on the team- centered approach in 2006- 07, the OSA is launching a new entity labeled the Investigative Task Force ( ITF). Led by the new head of the Investigative Division and the Deputy State Auditor, the ITF is designed to steer investigations when a deeper vein of fraud, waste or abuse is detected while using standard auditing techniques. Being comprised of auditors and staff with investigative, performance, non- profit compliance, financial and information system backgrounds, the ITF will be well positioned to follow “ risk- based” leads and then drill down to the source of fraud, waste or abuse of public resources.
Hotline
For the OSA to fully function as “ the taxpayers’ watchdog,” we need eyes and ears to detect the occurrence of fraud, waste and abuse of public resources in our communities. As mandated by State law to “ periodically” publish the hotline, OSA plans to launch a statewide television ad blitz. This blitz will consist of 30 second public service announcements designed to publicize the State Auditor’s Hotline, and will begin in the fall 2007. By advertising the State Auditor’s Hotline, we multiply the numbers of eyes and ears in North Carolina’s communities and equip them with a tool to enact positive change in State government.
Management Services and Nongovernmental Compliance Division ( MS& NGCD)
The process of issuing State grants to non- profits ( grantees) and enforcing compliance with State law has been an area of growing concern to the public, and is an area of increasing focus for OSA. We have found that most grantees want to comply with their grant requirements but some
2008 Strategic Plan
Annual Report 2007 | Strategic Plan Increasing Efficiency... Exposing Fraud
lack the skills or knowledge to do so. To increase compliance and streamline the process in 2008, OSA will focus on implementing the Grants Information Center ( GIC) online reporting system. Successful implementation of the GIC system will greatly increase the accuracy and the timeliness of the grant’s data to all interested parties, while significantly decreasing the workload of the grantees, the funding agencies and the Division.
Training
Training is an important function of MS& NGCD and the OSA plans to improve its efforts in 2008 by offering both live and online grants training. Plans are to conduct a minimum of 6 live sessions per month, in addition to setting up and offering online courses in an e- Learning format. An important part of training is providing information to grantees and funding agencies that is relevant to their particular circumstances. Con­sequently,
the OSA issues quarterly Best Practices newsletters to all grantees and funding agencies, provides research and reporting assistance via tele­phone
and email, and provides grantees and fund­ing
agencies with online grant reporting documents and formats dictated by the reporting statutes.
Compliance Reporting & Examinations
Each grantee that accepts public money should be eager to show how that money was spent for the public good. Compliance reporting is a means for each grantee to embrace transparency and take pride in fulfilling each obligation under State law and within their grant’s requirements. Moreover, the subsequent processing of compliance reports is an important benchmark in how effective OSA is at upholding compliance and accountability. Our goal for 2008 is to continue efforts to reduce the number of noncompliant grants.
Occasionally, circumstances produce the need for a more in- depth accounting of a grantee and its stewardship over its State grant. As a result, the OSA began a process of grant examinations in June 2006. For Fiscal Year 2007, OSA initiated 25 grant examinations ( 21 completed) that resulted in OSA recommending repayment of $ 419,000 in grant funds, equal to an average of $ 20,000 per examination. The number of these examinations may increase in 2008 to include as many as 40 reports by the end of that fiscal year. Furthermore, the OSA plans to conduct separate monitoring examinations of funding agencies. The Division’s goal is to complete 12 separate agency monitoring examinations by the end of the next fiscal year.
Information Systems Audit Division
Information is the commodity of the twenty- first century. To fulfill OSA’s constitutional mandate in the information age, the OSA deploys its IS Audit Division using a blend of savvy technology and traditional auditing skills to confirm the efficient and effective use of public resources in State government.
Strategic Reviews
One of the Division’s most promising new tools is the Strategic Review ( SAR). In 2006- 07, the Di­vision
used SARs to expose almost 27,000 invalid Social Security Numbers in 6 separate State enti­ties.
Perpetrators used these invalid SSNs to either gain State employment or obtain valid State identi­fication.
Using this success as a springboard, OSA plans to conduct more SARs in 2008 on a variety of issues not limited to the use of invalid SSNs.
North Carolina Office of the State Auditor Increasing Efficiency... Exposing Fraud
IWAYS Pilot
Streamlining the flow of information in the
digital age is essential to performing accurate and
timely reviews. In 2007- 08, OSA is conducting a
pilot project using the IWAYS interface to directly
access agencies’ data through an encrypted
information tunnel with the ability to retrieve that
data on demand. This system offers a seamless flow
of information as opposed to the current system
of a manual “ cut and paste” operation by agency
personnel.
Increasing the frequency
of access to information
is an additional benefit of
IWAYS. Currently, extract
files are obtained annually
by OSA’s IS Audit Division
who then hand- off the files
to the Financial Division for
their analysis. With IWAYS,
the IS Audit Division can
directly access the needed
information in real time
or on a consistent periodic
basis ( e. g., monthly).
Data Mining/ Warehousing
Accessing information on site can stall audits
and investigations and disrupt an agency’s
operations. In consultation with a national data
mining expert from Brigham Young University,
the OSA began data mining and data warehousing
information on its own computer servers to
remove every obstacle in the path of progress.
Going into 2008, the IS Audit Division is poised
to conduct operations such as trend analysis and
fraud routines on large chunks of data that have
been mined and warehoused. Once this project
is complete, the OSA will be able to investigate
suspicious trends in an agency’s financial receipts,
expenditures, and payroll expenses, and run fraud
routines on unique data profiles.
Performance Audit Division
Compared to other OSA divisions, the
Performance Audit Division is uniquely
engineered to evaluate whether State programs are
reaching their goals. OSA
has been able to shift some
of its productivity gains
made in 2006- 07 to expand
the Performance Audit
Division which specifically
concentrates on efficiency
and effectiveness of State
government programs. In
2008, the Division plans to
conduct more performance
audits than in 2007, equip
performance auditors with
additional tools through new
training, and provide greater
flexibility to meet emerging
needs when they arise.
Questions have arisen regarding the NC
General Assembly’s newly instituted Legislative
Program Evaluation Division and how this entity
compares with OSA’s Performance Audit Division.
Unlike the program evaluations conducted by the
legislature, OSA’s Performance Audit Division
is independent from other government entities
and reports directly to the public instead of to
legislative committees. Also, the Performance
Audit Division conducts rigorous audits according
Annual Report 2007 | Strategic Plan
The Performance
Audit Division
is uniquely
engineered to
evaluate whether
State programs
are reaching their
goals.
Increasing Efficiency... Exposing Fraud
to strict auditing standards, while the legislature’s program evaluations will be assessments of the appropriateness of any given program. Because the OSA is concerned with maintaining efficiency and effectiveness of existing programs, OSA welcomes the legislature’s new program as another set of eyes to evaluate goals and performance measures in State government.
Greater Flexibility
An excellent example of greater flexibility in the OSA’s Performance Audit Division is the 2007 audit of New Vistas Mountain Laurel, Inc. Mental Health Service Provider ( NVML), and the several ongoing performance audits in the area of mental health. As a direct result of requests by North Carolina General Assembly members and local leaders, the OSA was able to prioritize audits and divert resources to meet emerging needs because of greater flexibility built into the system. In 2008, OSA will build on this success and become even more flexible to tackle new issues and satisfy requests when they arise.
Conduct More Audits with Impact
A 2006 OSA performance audit found that the State’s internal audit function is inadequately staffed and is in need of more direct guidance from the General Assembly. Internal auditors are the first line of defense that provide independent assurance on the effectiveness and efficiency of a program. Based on the findings and recommendations from this audit, the General Assembly enacted the North Carolina Internal Audit Act which requires large agencies to devote resources and attention to internal auditors. In 2008, the OSA will conduct more audits designed to make a significant impact on the State of North Carolina.
Financial Audit Division
The Financial Audit Division is charged with some of OSA’s biggest responsibilities such as annual financial statement audits and reviews of the State’s sixteen universities and fifty- eight community colleges. In addition, this Division conducts one of the largest financial audits, the Comprehensive Annual Financial Report or CAFR, which contains the annual financial statements for the state of North Carolina as a whole. Because of the Division’s access and broad reach across the State, in 2008 they will become a critical component of the new Investigative Task Force.
Financial is OSA’s core division and biggest user of available resources. In 2006, OSA contracted with AuditWatch to refocus Financial’s auditors and staff to improve the efficiencies in which they conduct their audits. By committing to AuditWatch’s efficiency principles, Financial’s auditors and staff have cut inefficiencies, improved quality and have expanded productivity. That means that significant resources are now available to extend the reach of the OSA. Specifically, Financial would be able to address the critical need to conduct fiscal control audits on State agencies that have not been reviewed in the recent past.
North Carolina Office of the State Auditor 10 Increasing Efficiency... Exposing Fraud
Investigative Division
• In 2008, the Investigative Division will operate under new leadership with experience in investigating white collar crime such as political corruption and financial fraud for the FBI, and experience in identifying conflicts of interest and accountability issues for the State Ethics Commission.
• Since 2005, OSA reduced the number of open cases by 76% ( 120 to 29). This is a substantial accomplishment of increased efficiency given the fact that we received an average of 135 new cases a year since 2005.
• OSA reduced the average case age to 118 days from 315 days in 2005. This represents a reduction of 63%.
• OSA is launching a new entity termed the Investigative Task Force ( ITF) designed to steer investigations when a deeper vein of fraud, waste or abuse is detected while using standard auditing techniques.
• OSA is launching a statewide television ad blitz of a 30 second public service announcement beginning in the fall 2007 to publicize the State Auditor’s Hotline as mandated by State law.
Management Services and Nongovernmental Compliance Division
• During FY 2007, OSA trained 4,535 personnel from funding agencies or grant recipients in 72 training sessions. The total number of participants trained since August 2005 is 8,500.
• The Division began conducting agency and grantee examinations in June 2006. For Fiscal Year 2007, OSA has initiated 25 grant examinations ( 21 completed) that resulted in OSA recommending repayment of $ 419,000 in grant funds, equal to an average of $ 20,000 per investigation.
• As of June 30, 2007, OSA has dropped the grantee noncompliance rate to 18.5% reflecting the proper accounting of an additional $ 32 million.
• OSA, in conjunction with the Office of State Personnel, established the Effective Grants Administration Certificate Program resulting in 63 personnel from grantees and funding agencies earning certificates during Fiscal Year 2007
• OSA has shortened the processing time for grantee reports from 5 months in 2005 to approximately 3 days of receipt in 2007.
Executive Summary
Annual Report 2007 | Executive Summary Increasing Efficiency... Exposing Fraud 11
Performance Audit Division
• The NC General Assembly enacted the North Carolina Internal Auditing Act based on a 2006 Performance Audit on internal auditors in State agencies.
• An audit of the State Child Health Insurance Program ( SCHIP) identified $ 16,000,000 in annual savings and $ 3,500,000 in one- time savings if the State moved the responsibility for SCHIP medical claims processing from the State Health Plan to the Division of Medical Assistance.
• The OSA audited the Office of Indigent Defense Services and found that their policies and procedures did not adequately ensure poor defendants received competent legal representation, and that attorneys representing poor defendants were not sufficiently independent of judicial influence.
Information Systems Audit Division
• One of the IS Audit Division’s most effective tools is the Strategic Review ( SAR). In 2006- 07, the Division used SARs to expose almost 27,000 invalid Social Security Numbers in 6 separate State entities.
• In 2007- 08, OSA is conducting a Pilot project using the IWAYS interface to directly access agencies data through an encrypted information tunnel with the ability to retrieve that data on demand.
• The OSA is completing a data mining / data warehousing operation to conduct trend analysis and fraud routines on large chunks of data such as agency financial receipts and expenditures, payroll expenses, and unique data profiles such as SSNs of new driver��s licenses from DMV.
Financial Audit Division
• Bring Financial’s access and broad reach into Universities, Community Colleges and CAFR onto the Investigative Task Force.
• Continue efficiency gains to expand the productivity of all OSA divisions.
North Carolina Office of the State Auditor 12 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Investigative Division
OSA’s Investigative Division is one of its most effective watchdog tools for investigating allegations of fraud, waste and abuse of State resources. Relying on State constitutional and statutory authority, this arm of the OSA exposes fraud and State government waste by investigating tips received through the State Auditor’s confidential hotline.
The majority of tips that lead to investiga­tions
come from OSA’s 24- hour, toll- free hotline
[ 1- 800- 730- TIPS ( 8477)]. This Hotline is designed for state employees and the general public to re­port
activities they believe may be illegal or im­proper.
Allegations of fraud, waste and abuse may also be reported by traditional mail or via email at
hotline@ ncauditor. net.
To protect the integrity of tips, allegations of improper governmental activities are strictly confidential. In addition, state law provides protection from retaliation or discrimination for whistleblowers who report improper or illegal activities to the State Auditor.
Statistics
We have made great strides in detecting and preventing fraud, waste and abuse of State resources in 2007. We built on our 2006 accomplishments by reducing the number of open cases, completing cases with greater efficiency which reduced the average age of cases, while simultaneously investigating newly reported allegations.
Due to an increase in efficiency, the number of open cases has been steadily declining from 120 in 2005 to 29 in 2007, equaling a 76% decrease. Comparing fiscal 2007 with fiscal 2006, we reduced the number of open cases by 36% ( 29 from 45). This is a substantial accomplishment of increased efficiency given the fact that we received 139 new cases during this fiscal year. Consistent with these numbers is the decrease in the average case age. In 2005, the average case age was 315 days. By 2006 FYE, we reduced the average case age to 226 days, a reduction of over 28%. Currently, we reduced the average case age to 118, which is a reduction of 63% since 2005.
Goals
The goals for the remainder of 2007 and into 2008 are to effectively promote the State Auditor’s Hotline, launch the Investigative Task Force, and increase the efficiency and effectiveness of handling multiple investigations simultaneously.
The promotion of the State Auditor’s Hotline is mandated by statute and has proven to be the tip source for the majority of investigations leading to direct savings for the taxpayers. In the spring of 2007, OSA advertised the Hotline with unpaid promotions in State employee paycheck slips and automatic draft forms. This method provides important coverage, but is inherently limited. In the fall of 2007, OSA will launch a statewide television ad blitz featuring a 30 second spot designed to expose fraud, waste and abuse in State government. This one area is unique in that money spent to promote the Hotline will likely reap a far greater amount in savings to the taxpayers when fraud, waste and abuse of State money is uncovered. Timing of this promotion is key because the Investigative Division
Investigative Division Increasing Efficiency... Exposing Fraud 13
must have the ability to handle a sharp increase in
new cases. With the Division’s increase in efficiency
resulting in a lower number of open cases, we
believe that the fall of 2007 is the optimal time.
Building on the team- centered approach in
2006- 07, the OSA is launching a new entity labeled
the Investigative Task Force ( ITF). Led by the
new head of the Investigations Division and the
Deputy State Auditor, the ITF is designed to steer
investigations when a deeper vein of fraud, waste
or abuse is detected while
using standard auditing
techniques. Being comprised
of auditors and staff with
investigative, performance,
non- profit compliance,
financial and information
system backgrounds, the
ITF will be well positioned
to follow “ risk- based” leads
and then drill down to the
source of fraud, waste or
abuse of public resources.
A portion of 2006- 07’ s
efficiency gains will be put
to good use in the Investigative Division. Because
promotion of the Hotline will result in more tips,
more investigators will be needed as part of other
auditing teams. OSA plans to add more supervisor
and staff positions to the Investigative Division in
2008. OSA believes this will bring greater flexibility
to investigations and allow the Division to handle
multiple investigations simultaneously.
The following are summaries of the more notable
cases in Fiscal Year 2006- 2007. A complete list of
reports is detailed in Appendix A.
NORTH CAROLINA DEPARTMENT
OF ADMINISTRATION – DIVISION OF
PURCHASE AND CONTRACT
The Office of the State Auditor received a number
of allegations regarding a state term contract for tire
retreading. The allegations primarily concerned
a contractor who violated provisions of the
contract regarding charges for repairs, tire casing
identification, and price adjustments.
Auditors found the
contractor performed an
unusually high percentage
of spot repairs under the
provisions of the tire retread
contract. Review of invoices
to eight Local Education
Authorities ( LEA’s) and one
North Carolina Department
of Transportation ( DOT)
division revealed the
contractor charged for
the maximum three spot
repairs on 99.1% of the
9,900 tires retreaded during
a sample period. Other tire
retread retailers and industry experts indicated
it is not routine to perform three spot repairs per
tire for on- the- road tires. Auditors estimated the
contractor may have overcharged the local school
districts and DOT a minimum of $ 361,000 per
year by maximizing spot repair charges on almost
every tire. Auditors recommended the Department
of Administration-- Division of Purchase and
Contract ( P& C) eliminate the line- item charge for
spot repairs to halt the incentive to maximize repair
charges. In addition, P& C should monitor the
contractor’s performance and evaluate the awarding
North Carolina Office of the State Auditor
Because promotion of
the Hotline will result
in more tips . . .
OSA plans to add
more supervisors and
staff positions to the
Investigative Division
in 2008.
14 Increasing Efficiency... Exposing Fraud
of future contracts given the concerns raised.
Auditors also discovered the contractor violated contractual provisions related to price adjustments and itemized pick- up lists. The contractor changed the way it invoiced charges for spot repairs without notifying P& C as required by the contract terms. Further, the contractor failed to provide itemized lists of each tire casing picked up by the contractor resulting in two LEA’s receiving the wrong retread tires in return. OSA recommended the contractor comply with all contract provisions by notifying P& C of price changes and developing an inventory pick- up sheet that identifies each tire picked up for retreading.
UNIVERSITY OF NORTH CAROLINA HOSPITALS / UNIVERSITY OF NORTH CAROLINA SCHOOL OF PHARMACY
The Office of the State Auditor received an allegation through the State Auditor’s Hotline that the Pharmacy Director for the University of North Carolina Hospitals requested reimbursements from UNC Hospitals and the University of North Carolina at Chapel Hill’s School of Pharmacy for identical travel expenses. The complainant also alleged that the Pharmacy Director received improper reimbursements for cellular telephone expenses.
An investigation of these allegations found that the Pharmacy Director received over $ 2,300 in im­proper
reimbursements for travel and other expens­es.
In addition, auditors found that the Pharmacy Director improperly received over $ 2,300 for the reimbursement of cellular telephone charges. The Director reimbursed the University $ 1,202 upon the initial discovery of the improper payments.
In compliance with State law, the State Auditor notified the North Carolina Attorney General and appropriate law enforcement agencies of apparent instances of malfeasance, misfeasance, or nonfeasance by an officer or State employee. In addition to other recommendations, Auditors recommended that the Pharmacy Director reimburse the UNC School of Pharmacy and UNC Hospitals for the balance of the improper payments.
WAKE TECHNICAL COMMUNITY COLLEGE
At the request of the President of Wake Technical Community College, auditors conducted a special review of contract and procurement activities involving the Information Technology Services Division of the College. The review determined that Wake Tech’s Chief Information Officer fabricated a vendor quote to facilitate the award of a contract to a local business for just under $ 10,000. In another instance, the Chief Information Officer violated college policy by awarding a $ 10,400 contract to the same local business without obtaining formal proposals. Auditors also concluded that Wake Tech’s Executive Vice President’s approval of these transactions and personal friendship with the owner of the local business created the appearance of a conflict of interest.
OSA recommended that the College President take appropriate disciplinary action regarding the actions of the Chief Information Officer. OSA also recommended that Wake Tech’s Budget Office provide additional training to purchasing designees to ensure compliance with procurement policies
Annual Report 2007 | Investigative Division 15 Increasing Efficiency... Exposing Fraud
and procedures. A final recommendation called for the establishment of a conflict of interest policy that applies specifically to staff involved in the procurement process at Wake Tech
NORTH CAROLINA DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES – DIVISION OF WASTE MANAGEMENT
The Office of the State Auditor received an allegation through the State Auditor’s Hotline concerning a Processed Scrap Tire Material – Market Development Grant awarded by the Division of Waste Management. The purpose of the grant was to provide funding for a molding system that would produce rubber mats from recycled tire material. Allegedly, a tire recycling company that received the $ 320,000 grant failed to fulfill the grant requirements including specified levels of production and sales.
Auditors concluded the tire recycling company initially intended to create a sustainable rubber mat business. However, after receiving the grant award and in the course of developing the mat- making process, the company was unable to realize anticipated production and sales. To recover a portion of the original investment, auditors concluded the company set up and ran the mat- making machine to obtain the initial grant payment and then fabricated documents to fulfill the grant requirements and obtain subsequent payments from the Division of Waste Management. OSA recommended that the Division of Waste Management consider legal action to recover the entire grant award. The findings were also referred to the State Bureau of Investigation.
NORTH CAROLINA DEPARTMENT OF CULTURAL RESOURCES / FRIENDS OF THE MUSEUM, NORTH CAROLINA MARITIME MUSEUM, INC. / GALLANT’S CHANNEL PROPERTY TRANSACTION
Following concerns from some Council of State members and a written request from the Secretary of the Department of Cultural Resources, the Office of the State Auditor conducted a special review of a transfer of property from a non- profit organization to the State of North Carolina and the funding of a boat race and festival known as “ Pepsi Americas’ Sail 2006.” Concerns included the lack of disclosure of outstanding debts against the property, questions regarding the value of the property, the possibility that the State was paying for the land a second time, and potential misuse of funds regarding the Tall Ships event. The investigation resulted in multiple findings regarding lack of signed agreements, vio­lation
of Natural Heritage Trust Fund regulations, improper notification of state officials, and poor cost control for the Tall Ships event.
In addition, the investigation presented additional information that clarified some outstanding issues. For example, the review determined the State provided $ 3.45 million for the purchase of the Gallant’s Channel property in 1996 with a total State investment of $ 8.9 million over the next 10 years. After considering various appraisals performed by different entities, the Office of the State Auditor estimated the property���s value exceeds $ 20 million.
The investigation revealed there was no signed agreement between the State of North Carolina and the Friends of the Maritime Museum regarding the ownership or development of the Gallant’s Channel property. As a result, the State had no control or
North Carolina Office of the State Auditor 16 Increasing Efficiency... Exposing Fraud
input over the development of the property. The
Friends of the Museum maintained legal title and
could have refused to transfer the property, sold the
property, or developed the site without recourse
from the State. Auditors recommended the State
develop written agreements for all property
transactions and the State Property Office review its
files to determine if similar arrangements exist.
In addition, auditors
found the State Property
Office failed to complete the
property acquisition process
after Council of State approval
in 1998 and the Department
of Cultural Resources did
not notify the State Property
Office when the property was
deeded to the State in 1999.
Further, the Council of State
was not properly informed of
outstanding liens filed against
the property in October
2006 prior to accepting the
property transfer. Auditors
recommended the State
Property Office review its files and require copies
of deeds before closing any property transaction
file. Further, the Office of the State Auditor
recommended the State Property Office disclose
all pertinent information to the Council of State
including providing details in writing in advance to
Council members for complex transactions.
Regarding the Tall Ships event, the investigation
discovered the Pepsi Americas’ Sail 2006, LLC did
not have signed contracts with vendors for major
services. The lack of signed contracts contributed
to the cost escalation for the event. In addition,
insufficient revenue and inadequate cost control
resulted in financial losses for the Tall Ships event.
Several factors contributed to the event losses of
almost $ 2 million such as inadequate planning,
unrealistic attendance estimates, failing to designate
one individual or committee as ultimately in charge,
poor weather, lack of ships available for boarding,
and customer complaints
leading to discontinued
ticket sales and refunds.
OSA recommended the
Department of Cultural
Resources establish
procedures for organizing
and managing cultural and
entertainment events that
support North Carolina
arts and history to help
ensure the event’s success
while minimizing the risk of
financial loss.
NORTH CAROLINA
STATE UNIVERSITY
– FACILITIES OPERATIONS DEPARTMENT
Investigators received an allegation through the
State Auditor’s Hotline that an employee of the
North Carolina State University ( NCSU) Facilities
Operations Department wrote specifications for
building maintenance projects, participated in the
bid solicitation and selection process, and sold
equipment to a contractor that was awarded the
contract. This employee allegedly also oversaw
the performance of a convenience maintenance
contract awarded to the same contractor.
Annual Report 2007 | Investigative Division
The investigation resulted
in multiple findings
regarding lack of signed
agreements, violation of
Natural Heritage Trust
Fund regulations, improper
notification of state officials,
and poor cost control for the
Tall Ships event.
17 Increasing Efficiency... Exposing Fraud
Investigators found a project manager used his University position to derive a direct benefit for his private business. In his capacity as a Facility Mechanical Engineer, a NCSU project manager wrote specifications for the purchase and installation of a chiller while also being involved in the public bid review and amendment process. Investigators review of the project manager’s NCSU computer revealed the project manager was the owner of a company who supplied the chiller at a $ 10,000 mark- up to the company awarded the contract with NCSU. Investigators discovered other transactions between the project manager’s company and the contractor. In total, investigators identified another $ 14,000 in payments to the project manager’s company from the contractor. Investigators recommended NCSU establish policies related to construction contracts that require management to review information related to any subcontractors, suppliers, or other vendors for the primary contractor. In addition, management should perform periodic comparisons of NCSU employee information and vendor information to determine if any employee is receiving payments also as a vendor or contractor.
In addition, investigators discovered the project manager failed to properly disclose secondary employment information to management. Analysis of the project manager’s computer revealed numerous files containing purchase orders, invoices, job quotations, and correspondence related to his personal company. These documents were dated subsequent to his employment with NCSU and indicated ongoing business relationships with various heating and air conditioning contractors and vendors in North Carolina and other states. The project manager admitted he had not completed required secondary employment forms or notified management of his secondary employment activities. Further, the project manager acknowledged attempts to conceal these business relationships by portraying his wife as the owner of his private company and using a false business address in Kansas. OSA recommended NCSU ensure all employees complete a secondary employment form in accordance with State Personnel policies and consider requiring all employees who have positions involving managerial decision- making to complete an additional conflict of interest statement annually. The findings were also turned over to the local District Attorney.
NORTH CAROLINA DEPARTMENT OF TRANSPORTATION
Auditors received allegations through the State Auditor’s Hotline that the Assistant State Geotechnical Engineer misused funds paid to the Department of Transportation ( DOT) by the attendees, exhibitors, and sponsors of a conference hosted by DOT. Auditors identified eight instances totaling over $ 36,000 in which conference funds were disbursed in violation of departmental policy requiring approvals by the DOT Purchasing Officer. In addition, DOT spent over $ 1,200 in conference funds to purchase information technology items without the approval of DOT’s Purchasing or Information Technology divisions as required by policy. OSA recommended management take appropriate action for the Geotechnical Engineer’s failure to follow policy and reemphasize the importance of compliance with purchasing and information technology regulations.
North Carolina Office of the State Auditor 18 Increasing Efficiency... Exposing Fraud
NORTH CAROLINA SCHOOL OF SCIENCE
AND MATHEMATICS
Investigators received allegations through the
State Auditor’s Hotline regarding the finances for a
student exchange trip to Germany in February 2005.
Allegedly, the North Carolina School of Science and
Mathematics ( School of Science and Math) did not
fully refund surplus travel fees to the parents of
student participants.
Students participating
in the exchange trip
paid $ 1,500 in advance
to cover costs and
trip materials with
the indication that
any unspent money
would be refunded.
Investigators found the
total cost of the trip was
approximately $ 16,500
despite collections of
$ 30,500, and as a result,
School of Science and
Math administrators
should have refunded
19 students $ 707.56 and
one student $ 607.56.
However, the School only refunded $ 565 per student
and retained a balance of over $ 2,700 towards the
cost of future exchange trips. The investigation also
revealed the School of Science and Math did not
sufficiently disclose the trip’s finances or how the
surplus funds would be applied.
OSA recommended the School of Science
and Math notify parents that fees were retained
and provide each parent an opportunity to either
receive a refund or indicate their desire to make a
donation to the exchange program. In addition, the
administration should clearly disclose in future fee
schedules that a portion of fees may be applied to
program activities in subsequent years.
NORTH CAROLINA UTILITIES COMMISSION
PUBLIC STAFF
The Office of the
State Auditor received
a complaint alleging the
Information Technol-ogy
Director ( Director)
for the North Carolina
Utilities Commission
Public Staff used a state
computer and network
resources to teach col-lege
courses during the
normal work day. The
Director completed a
secondary employment
form that indicated he
only taught one class
at one local college.
However, auditors de-termined
the Director
taught courses at Peace College, Wake Technical
Community College, and Capella University during
the past two years. While the majority of the class
schedules took place during the evenings and week-ends,
some classes were scheduled during the day.
Auditors concluded the Director violated agency
policy by excluding two teaching positions which
prevented management from adequately assessing
the effect of the secondary employment.
Annual Report 2007 | Investigative Division
School of Science and
Math should have
refunded 19 students
$ 707.56 and one student
$ 607.56. However, the
school only refunded $ 565
per student and retained
a balance of over $ 2700
towards the cost of future
exchange trips.
Increasing Efficiency... Exposing Fraud 19
Analysis of computer files confirmed the Director
used state computer resources for his secondary
employment. An examination of his state- issued
computer revealed over 8,300 e- mails related to
secondary employment over a six- year period and
over 900 additional e- mails related to students and
staff at the educational institutions identified above.
These e- mails were generally sent during normal
work hours and included the Director’s contact
information at the Utilities
Commission Public Staff.
OSA recommended man-agement
take appropriate dis-ciplinary
action for the Direc-tor’s
failure to fully disclose
the extent of his secondary
employment and for violat-ing
the “ reasonable personal
use” provision of the agency’s
internet policy. In addition,
management should ensure
employees fully disclose sec-ondary
employment on an
annual basis and re- empha-size
the internet usage policy.
NORTH CAROLINA AGRICULTURAL AND
TECHNICAL STATE UNIVERSITY
Investigators received allegations through
the State Auditor’s Hotline that the Assistant
Vice Chancellor of Police and Public Safety at
North Carolina Agricultural and Technical State
University ( University) used a University cellular
phone for personal calls. An analysis of cell phone
records indicated the Assistant Vice Chancellor
accumulated over 2,400 minutes of airtime use for
calls of a personal nature. This misuse of the cell
phone violated University policy and resulted in
over $ 1,100 of wireless charges for personal calls.
OSA recommended the Assistant Vice Chancellor
reimburse the University for these calls and that
management re- emphasize the policy prohibiting
personal use of state- issued cell phones.
NORTH CAROLINA
DEPARTMENT OF
HEALTH AND HUMAN
SERVICES -- DIVISION OF
PUBLIC HEALTH
An allegation was received
through the State Auditor’s
Hotline concerning a conflict
of interest related to second-ary
employment within the
Physical Activity and Nutri-tion
Branch of the Division
of Public Health. Auditors
confirmed that management
created a business to provide
consulting services to groups
outside state government and North Carolina since
2001. However, management did not complete a
secondary employment form or receive manage-ment
approval as required by departmental policy.
OSA recommended that management submit a
secondary employment form for management ap-proval
and that Department of Health and Human
Services management reinforce the requirement to
employees including an annual update.
North Carolina Office of the State Auditor
Management should
ensure employees fully
disclose secondary
employment on an
annual basis and
re- emphasize the
internet usage policy.
20 Increasing Efficiency... Exposing Fraud
Management Services &
Nongovernmental Compliance Division
The Management Services and Nongovernmental Compliance Division ( MS& NGCD), has the responsibility of increasing oversight and accountability of State and Federal pass- through grants typically given to nonprofit organizations. The Division, formed in July 2005 in response to changes in grants reporting statutes, responds to the growing need for compliance oversight and training to adhere to changing reporting requirements.
The impetus for the creation of MS& NGCD was twofold. First, OSA needed to refocus its resources to increase training and “ best practices” for nonprofit organizations receiving State grants. Second, OSA needed to increase compliance and accountability of funds on the grantee and funding agency levels. The Division has set measurable goals for 2008 based on the accomplishments of the past two years.
OSA is proud to report that MS& NGCD continues to meet all areas of its original mission. The following is a summary of 2007 accomplishments, broken down by internal category:
Training
• Grants Training: During fiscal year 2007, the Division trained 4,535 participants in 72 training sessions, bringing the total number of participants trained since August 2005 to approximately 8,500. This training has continued to contribute to fewer grantees in noncompliance.
• Effective Grants Administration Certificate Program: Working with the Office of State Personnel, the Division established the Effective Grants Administration Certificate Program consisting of 5 core grants training courses that provide the basics for good oversight and accountability of grant funds. During fiscal year 2007, 63 grantee and agency personnel have earned this Certificate.
• Multifaceted Training: Other types of training included grants administration sessions directed at State agency personnel, grants reporting/ accountability sessions directed at grantees, special sessions conducted at the request of various groups ( e. g., DHHS and state level associations of various types) and presentations at 17 conferences during the fiscal year.
• Web- based Training Resources: The Division provided templates, reference materials and training tools to all participants online. Additionally, considerable work was done on setting up e- Learning opportunities for grants training. This work resulted in the first online e- Learning offering for the 2- hour Grants Administration Update posted on July 31, 2007.
Compliance
• Increased Grantee Compliance: Posting the monthly noncompliance list on OSA’s web page has served to inform legislators, State
Annual Report 2007 | Management Services & Nongovernmental Compliance Division Increasing Efficiency... Exposing Fraud 21
funding agencies, and the public of which grantees have not complied with the statutory reporting requirements. While the monthly noncompliance percentage varies, at June 30, 2007 the noncompliance rate had dropped to 18.5% reflecting the proper accounting of an additional $ 32 million.
• Increased Review of Grantees’ Annual Reports: During fiscal year 2007, OSA reviewed 61% more grantee annual reports due to changes in statutory regulations that affected 2006 annual reports filed in fiscal year 2007. As a result, the number of grants covered under OSA’s review increased to 4,786 from 2,969 in fiscal year 2006.
• Timely Processing of Grantee Reports: The Division has shortened the time it takes to process grantee reports from a 5- month backlog in 2005 to processing within approximately 3 days of receipt in 2007.
• Online Reporting Program: Working in conjunction with the Office of Information Technology Services, the Division is finalizing a new online reporting program for State agencies and grantees. This program, which is scheduled to be fully operationally by December 2007, will eliminate redundancy, increase data capture efficiency, and improve reporting timeliness.
Best Practices and Research Assistance
• Quarterly Best Practices newsletter: This newsletter updates grantees on state grant requirements, potential financial accountability problems and developing adequate internal policies and accounting controls. The Division published four quarterly issues during fiscal year 2007 which are posted on the OSA web page.
• Research and Reporting Assistance: The Division continues to provide assistance, via telephone or email, on unique, confusing and complicated questions related to grants reporting.
• Current Documents and Formats: The Division provides grantees and funding agencies information on required grant reporting documents and formats through developing, updating and maintaining online forms dictated by the reporting statute.
Agency and Grantee Examinations
• Grant Examinations: The Division began conducting agency and grantee examinations in June 2006. For Fiscal Year 2007, OSA has initiated 25 grant examinations ( 21 completed) that resulted in OSA recommending repayment of $ 419,000 in grant funds, equal to an average of $ 20,000 per examination.
• Examination Training Tools: The Division uses the examination process to educate agency personnel on monitoring techniques and to suggest improvement to those techniques. In addition, the examination provides an excellent opportunity to provide best practice information on improving accountability to grantees.
Special Projects
• Local Government Grants: The Division has worked closely with the Local Government Com­mission
at the state level to identify and capture data on grants flowing to local government units. The result is a summary report and grants data­base
that is posted on the OSA web page giving information about the approximately $ 12 billion in State and Federal grants at the local level. This report will be updated annually.
North Carolina Office of the State Auditor 22 Increasing Efficiency... Exposing Fraud
• Audit Findings Database: The Division updates and maintains an audit findings database to identify problem trends at State agencies. This database assists in internal audit planning and the identification of best practices to share with State agency and grantee personnel.
Going into 2008, the Division will focus on implementing the Grants Information Center ( GIC) online reporting system. This will entail conducting training sessions statewide for both funding agency and grantee personnel. Successful implementation of the GIC system will greatly increase the accuracy and timeliness of grants data to all interested parties while significantly decreasing the workload of the funding agencies and the Division. Furthermore, GIC will afford the grantees a much simpler method of complying with statutory reporting requirements.
Compliance reporting and subsequent pro­cessing
is an important benchmark in how effec­tive
MS& NGCD is at compliance and account­ability.
While OSA cannot control the number of reports it receives, it can control its efficiency in regard to bringing noncompliant grantees into compliance. The number of noncompliant grant­ees
ebbs and flows with reporting deadlines and, for fiscal year 2007, was significantly impacted by the statutory change in reporting requirements. That statutory change presented unexpected chal­lenges
to our 2007 goal of a 30% reduction in the number of noncompliant grants. The Division’s goal for 2008 is to continue efforts to reduce the number of noncompliant grants.
Coordinating and cooperating with the grantor agency is of primary importance to successfully monitor and review nonprofits and their grantor agencies. The Division posted 29 grant examinations and exceeded its goal of completing 24 examinations during fiscal year 2007. The goal for 2008 is to increase the number of new examinations from 29 completed in 2007 to 40 by the end of this fiscal year. In an effort to help train agency monitors to be proactive thinkers, the Division plans to conduct separate monitoring examinations of grantor agencies. For fiscal year 2007, these examinations were conducted in conjunction with the grant examination. The Division’s goal is to complete 12 separate agency monitoring examinations by the end of next fiscal year.
Training is an important function of MS& NGCD and the Division plans to continue its efforts in 2008 by offering both live and online grants training. Plans are to conduct a minimum of 6 live sessions per month, in addition to offering online courses in an e- Learning format. An important part of training is providing information to grantees and grantors that is relevant to their particular circumstances. To aid in this effort, the Division will continue to issue its Best Practices quarterly newsletter and identify other efforts to benefit both grantors and grantees. Best Practices is distributed to all 3,789 grantees identified in our grants database, as well as agency personnel involved with grants administration.
Annual Report 2007 | Management Services & Nongovernmental Compliance Division Increasing Efficiency... Exposing Fraud 23
O SA’s Performance Audit Division is
designed to allow for flexible deploy-ment
of resources while upholding
strict auditing standards. Unlike prescheduled fi-nancial
audits, the subjects of performance audits
are chosen at the discretion
of the State Auditor upon
consideration of two fac-tors:
greatest risk potential
and greatest opportunity
for impact. Upon release,
performance audits provide
the public, agency manag-ers
and program managers
with an objective analysis
of whether State agencies
efficiently and effectively
manage their programs
and activities. Furthermore,
these audits are of particu-lar
value to legislators who
must consider the effectiveness of State programs
in funding decisions and to the taxpayers who pay
for those programs.
OSA’s efforts in the Performance Audit Division
during 2007 revolved around retooling its work to
produce reports that are narrower in scope and
target specific programs or areas where the State
is at greatest risk. Training for the Division’s au-ditors
and staff focused on performance measure-ment
and business process improvement. Weekly
training sessions instructed auditors how to iden-tify
opportunities to make government operate
more efficiently, how to evaluate the relationship
between program results and the resources used
to achieve those results, and how to develop mea-surement
based audit objectives. The continued
reengineering of the Performance Audit Division
will result in value- added audits that focus on pro-active
issues and strengthen
the State Auditor’s watch-dog
function in State gov-ernment.
The following are sum-maries
of the Performance
Audit Division’s audit re-ports:
State Children’s Health
Insurance Program
( SCHIP)
The audit objective was
to determine if the State
could realize cost savings
by moving SCHIP claims
processing from the State Health Plan to the
Division of Medical Assistance.
The audit found that the State could realize
nearly $ 16,000,000 in annual savings and have
access to $ 3,500,000 currently held in reserve at the
State Health Plan by moving the responsibility for
SCHIP medical claims processing from the State
Health Plan to the Division of Medical Assistance.
Based on the SCHIP medical payments budgeted
for the 2008 fiscal year, almost 10,000 additional
children could be enrolled in the program and
receive medical coverage using the recurring
administrative savings and additional rebates.
North Carolina Office of the State Auditor
Performance Audit Division
The continued
reengineering of the
Performance Audit
Division will result in
value- added audits that
focus on proactive issue
and strengthen the State
Auditor’s watchdog
function in State
government.
24 Increasing Efficiency... Exposing Fraud
New Vistas – Mountain Laurel Inc, Mental
Health Service Provider
As a result of a request by several members
of the North Carolina General Assembly and
local leaders, the State Auditor conducted a
performance audit on New Vistas – Mountain
Laurel, Inc. ( NVML). The audit’s main objective
was to determine the causes for the demise of this
local mental health service provider.
The audit found that while systemic issues within
mental health reform contrib-uted
to the closing of NVML,
the organization encountered
significant business challenges
that severely compromised its
ability to succeed. Contribut-ing
factors included: problems
originating from NVML’s cre-ation
as a spin- off organiza-tion
from the Blue Ridge Area
Authority; financial instabil-ity
due to inadequate capital
resources, cash flows, and in-formation
and financial man-agement
systems; and staffing
deficiencies.
The audit also identified several key statewide
issues which were presented as issues for further
study. They include:
• The need to define the roles of key players in the
mental health reform efforts, particularly at the
state and county levels.
• The sufficiency of the current private provider
format to ensure that adequate services are avail-able
and provided in all areas as needed.
• The immediate need for crisis centers to address
current needs and the potential increase due to
the planned phase- out of State- based facilities.
Indigent Defense Services
The audit objectives were to determine if the
Office of Indigent Defense Services’ policies and
procedures provide reasonable assurance that
independent and competent legal services are
provided to indigent defendants, determine if
payments for legal services are made accurately
and efficiently, and make
recommendations regarding
process improvements.
The audit found that attor-neys
representing indigent de-fendants
were not sufficiently
independent of judicial influ-ence
because judges performed
managerial functions, such as
appointing Public Defend-ers
to office, assigning cases
to attorneys, establishing at-torney
rosters, and approving
attorney fee payment applica-tions.
In addition, the Office
of Indigent Defense Services’
policies and procedures did not adequately ensure
that competent legal representation was provided
for indigent defendants because statewide criteria
were not used to select qualified attorneys, attor-ney
performance was not systematically evaluated,
and standard procedures were not established to
monitor and resolve client complaints.
The audit also found that attorney fee pay-ment
procedures were inefficient and inadequate
to prevent duplicate payments, overcharges, or
Annual Report 2007 | Performance Audit Division
This mental health
audit also identified
several key statewide
issues which were
presented as issues for
further study.
25 Increasing Efficiency... Exposing Fraud
unauthorized payments. Procedural weaknesses included failure to verify case numbers on fee ap­plications,
lack of detailed time sheets to support charges, attorneys with multiple vendor numbers, and inadequate segregation of duties.
The report also stated that the Office of Indigent Defense Services lacked adequate resources to properly address many of the issues identified during the audit.
Office Supplies Term Contract Administered by the Purchase and Contract ( P& C) Division of the Department of Administration
The objective of this performance audit was to determine whether P& C was effectively monitoring vendor performance of the statewide term contract for office supplies. We performed tests to determine if quoted catalog prices, as well as actual prices charged to State agencies, agreed with contract prices. In addition, we tested to determine if items offered under the contract were available for purchase.
The audit found that P& C was aware of pricing errors and product availability issues, but had not taken steps to identify the underlying causes of the problems and subsequently require permanent, corrective action from the vendor ( Office Depot). In addition to identifying $ 40,887 in vendor overcharges to State agencies, the audit concluded that the absence of permanent, corrective action compromised State agencies’ assurance that contracted items would be readily available for purchase at contracted prices.
Economic Development Studies
The audit objective was to assess the implementation status of several significant recommendations addressed in consultants’ studies. These consultants were hired by the State or related organizations to assess the operations of North Carolina’s economic development system. The studies presented similar findings, although they were performed at different times by different consultants.
The audit found that the Department of Commerce does not function as the lead agency for economic development activities for the State. Instead, the regional commissions and partnerships set their marketing agendas independently from the Department. Also, North Carolina’s economic development objectives, roles, and vision are not clear to many in the economic development community. A statewide marketing plan inclusive of all the economic development system had not been developed.
The audit also found that the Governor plays a key role in determining the economic plan for North Carolina. Results from surveys of North Carolina’s economic development participants suggested that the Governor’s visibility and leadership could be enhanced by more involvement with the local economic development community.
Finally, the audit found that monitoring of the regional partnerships by the Department was limited. Monitoring efforts did not focus on comparing actual accomplishments to specific goals and performance measures for the partnerships.
North Carolina Office of the State Auditor 26 Increasing Efficiency... Exposing Fraud
Enterprise Project Management Office
( EPMO)
The objectives of this assessment were to
determine the design and implementation of the
recently created Enterprise Project Management
Office, and determine if the policies, procedures
and methodologies employed significantly
improved the likelihood that agency information
technology ( IT) implementation projects
would be successful. This
assessment was performed
under contract with the IT
management firm of Berry,
Dunn, McNeil, & Parker.
The team concluded that
the EPMO has improved the
likelihood that state agency
IT projects are completed
on time, within budget,
and with the required
functionality as compared to
the pre- EPMO environment
( i. e., prior to January 2005).
The team also identified
several findings and
recommendations in six key
topical areas. These findings and recommendations
provide best practice insight and opportunities for
improved services for the still maturing office.
Internal Auditing In North Carolina
Agencies and Institutions ( Update)
The prior year performance audit found that
the State’s internal audit function is inadequately
staffed and is in need of more direct guidance
from the General Assembly. Furthermore, no
universal State criteria or minimum standards
existed regarding internal audit effort, authority or
responsibilities.
Based on the findings
and recommendations
from this audit, the General
Assembly initiated a further
study of the internal audit
efforts within the State and
later enacted the North
Carolina Internal Audit
Act. Legislation now
requires agencies with an
annual operating budget
of $ 10 million in operating
revenue, agencies with
more than 100 employees,
or agencies that receive
and process more than $ 10
million in cash in a fiscal
year to have an internal audit effort. The act also
sets requirements for the types of audit work to
be performed, professional auditing standards to
be followed, minimum qualifications of internal
audit staff, and a direct reporting relationship to
the agency head.
Annual Report 2007 | Performance Audit Division
The NC General
Assembly enacted the
North Carolina Internal
Auditing Act based on a
2006 Performance Audit
on internal auditors in
State agencies.
27 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
Information Systems Audit
Division
The Information Systems Audit Division’s responsibilities include analyzing State agency computer systems to ensure that they are properly secured, produce accurate financial reports and comply with State regulations. Staff in this division conduct their own audits of computer systems across the State. In addition, they provide IS audit assistance to financial audit teams to ensure that agency computerized accounting systems can be relied upon to produce accurate financial reports. Without those assurances, financial audit teams would be unable to issue unqualified opinions on the accuracy of agency financial statements.
IS Audit Division auditors are in a unique position to think proactively about discovering suspicious data trends flowing from an agency’s information systems. OSA’s goal for 2006 was to integrate IS auditors into Financial and Investigative audit teams and to increase proactive auditing by providing computer forensic assistance and data mining analyses of agency financial data.
To accomplish this goal, OSA developed a new tool called Strategic Reviews that are issued separately from IS audits. These reviews are used to uncover fraud, waste or abuse of taxpayer resources by following suspicious State agency data trends. While initiated and coordinated by the IS Audit Division, these reviews involve auditors from all divisions of the OSA.
Strategic Reviews build a bridge from an abstract proactive policy to the actual practice of being proactive. By conducting Strategic Reviews through the use of data mining analysis, OSA is in the forefront of auditing trends. To improve innovation and effectiveness, OSA hosted an on site visit of a leading expert in data mining from Brigham Young University. Fueled by resources from AuditWatch efficiency gains, OSA plans to increase the number of Strategic Reviews to bring more accountability to State government.
The OSA’s emphasis for the future is to weave more IS Audit Division auditors into other auditing processes to instill a team- centered approach. Together, the team can more readily identify security risks or suspicious data trends. The General Assembly has approved OSA’s request to hire 6 additional auditors over two years to facilitate the team- centered approach to auditing.
The following is a summary of IS Audit Division’s reports and reviews conducted during 2006- 2007:
Strategic Review: North Carolina Division of Motor Vehicles
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the North Carolina Division of Motor Vehicles’ driver’s license database. This review found 14,122 invalid SSNs. In addition, the review found 12,796 SSNs that belonged to deceased persons on the Social Security Administration’s Death File.
Strategic Review: North Carolina Department of the Treasurer
OSA received a tip that 10 local government retiree beneficiaries had been overpaid. OSA initiated a strategic review to determine the magnitude of the overpayment. OSA selected a sample of Law Enforcement Officer Retirees within the Local Government Retirement System ( LGRS), and a statistical sample of retirees from the entire LGRS population. Our review noted that the 10 retiree beneficiaries were overpaid by $ 1,372,219.32. From our samples of other retirees in the LGRS, we did not find any additional overpayments. 28 Increasing Efficiency... Exposing Fraud
Strategic Review: NC Department of Justice
The purpose of this Strategic Review was to identify invalid social security numbers in the payroll system at the North Carolina Department of Justice and to investigate unusual payments noted on the Department’s payroll. This review found that one retired employee continued to receive a special separation law allowance for 20 months after this employee’s death.
Strategic Review: NC State University
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the payroll system at North Carolina State University and to investigate unusual payments noted on the University payroll. This review found that 8 University employees had SSNs that matched the SSNs of deceased persons. Seven of these employees’ numbers were keypunch errors. The other employee was using a SSN that belonged to a deceased person. In addition, one University employee did not have an I- 9 form on file.
Strategic Review: UNC Hospitals
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the payroll system at UNC Hospitals. This review found that UNC Hospitals failed to perform a quarterly verification of SSNs for their employees. In addition, this review found employees who were using SSNs assigned to other people ( deceased and living).
Strategic Review: UNC- Chapel Hill
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the payroll system at UNC Chapel Hill. This review found one employee whose SSN matched the SSN of a deceased person on the Social Security Administration’s Death File.
IS Audit: Beaufort Community College – General Controls Review
OSA conducted an Information System audit of Beaufort Community College ( BCC). The primary objective of this audit was to evaluate IS general controls at BCC. The scope included general security, access controls, systems software, physical security, and disaster recovery. OSA found weaknesses in access controls and recommended improvements to management in a private letter. The detailed results of the assessments are kept confidential as to not announce control weaknesses to would- be intruders.
IS Audit: Fayetteville State University – General Controls Review
OSA staff audited Fayetteville State University with the primary objective to evaluate general controls. The audit’s scope included general security, access controls, program maintenance, systems software, systems development, physical security, and disaster recovery. OSA found several weaknesses in access controls.
IS Audit: UNC Pembroke – General Controls Review
OSA conducted a general controls audit at UNC Pembroke ( UNCP). The scope of the audit included general security, access controls, program maintenance, systems software, systems development, physical security, and disaster recovery. OSA found that UNC Pembroke’s security policies were in draft format, a security baseline had not been developed and UNCP had not performed a risk assessment. In addition, OSA found several weaknesses in access controls.
Information Security Vulnerability Assess­ments
– NC Department of Transportation
The purpose of this assessment was to gauge NC DOT’s security posture at any given point in time, identify security risks that might make an entity vulnerable to attack, and determine appropriate procedures to mitigate the identified risks. The detailed results of the assessments are kept confidential as to not announce control weaknesses to would- be intruders. General results containing the numbers of high, medium and low weaknesses are released to the public through OSA’s website and electronic posting service.
Annual Report 2007 | Information Systems Audit Division 29 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
Staff in the Financial Audit Division audit state agencies, universities, community colleges, clerks of superior court, and Smart Start nonprofit organizations. The State Auditor is required to perform these audits as part of statutory responsibilities or to comply with federal requirements. Some audits are performed at the State Auditor’s discretion to ensure that all agencies are properly reporting their financial conditions.
The Office of the State Auditor spent the greatest percentage of hours ( 49%) to perform annual financial statement audits/ reviews of the State’s sixteen universities and fifty- eight community colleges. One of its largest financial audits is the state’s Comprehensive Annual Financial Report ( CAFR), which accounted for 13% of staff hours. The CAFR contains the annual financial statements for the state of North Carolina as a whole.
Another major financial audit project, accounting for 29% of staff time, is the state’s Single Audit Report. The Single Audit Report contains the results of the audit of the state’s financial statements and the audit of the state’s compliance with laws and regulations pertaining to federal grant programs. The office periodically audits selected fiscal controls of clerks of superior court and general government agencies.
The audit staff conducts financial and compliance audits of the organizations participating in the Smart Start program, including the statewide coordinating agency ( the North Carolina Partnership for Children, Inc.) and the individual local partnerships. Smart Start is an early childhood development program designed to prepare children to begin school healthy and ready to succeed. Currently, 79 Smart Start partnerships operate throughout the state.
Financial Audit Results Summary
For the thirteenth consecutive year, the State Auditor issued an unqualified opinion on the State’s financial statements. This opinion, for the fiscal year ended June 30, 2006, was contained in the CAFR prepared by the Office of the State Controller.
The State of North Carolina also received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association for the thirteenth consecutive year. This award is given to government units whose CAFR achieves the highest standards in government accounting and financial reporting.
In conjunction with the audit of the State’s finan­cial
statements, the State Auditor issues a report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements in the Single Audit Report. Six findings of non- compliance and weaknesses in in­ternal
control related to the financial statement au­dit
were reported. These findings disclosed internal control deficiencies related to separation of duties, bank reconciliations, year- end financial reporting, Medicaid cost settlements, Medicaid claims pay­ments,
and processing of student financial aid ap­plications.
With regard to compliance with federal program requirements, the State Auditor issued a qualified opinion on certain federal programs due to mate­rial
noncompliance with certain requirements. In
Financial Audit Division 30 Increasing Efficiency... Exposing Fraud
total, auditors identified questioned costs resulting from 89 identified audit findings.
In addition to reporting on the CAFR and Single Audit at the statewide level, OSA publishes in separately issued reports the audit findings and recommendations from CAFR and Single Audit work for each individual government agency.
Reported findings from university and community college audits for fiscal year 2006 primarily related to four areas: access rights, financial statement preparation, management oversight and internal control weaknesses. These internal control weaknesses were in areas such as financial aid awards, cash receipts and deposits, cash disbursements and separation of duties.
In the Clerk of Superior Court audits performed in fiscal 2007, OSA noted internal control weaknesses. These internal control weaknesses were in areas such as cash receipts and disbursements, segregation of duties and timely deposits. To better direct our limited staff resources, we have set a target of auditing each Clerk of Superior Court every three years.
Smart Start findings issued during 2005- 2006 focused on internal control weaknesses, contract management and monitoring, and competitive bidding. Audit reports issued during the year ended June 30, 2007 are listed in appendix A. This included a total of 9 audit reports for the fiscal year ended June 30, 2005, issued subsequent to June 30, 2006.
For the fiscal year ended June 30, 2006, the Office of the State Auditor performed 41 audits of Smart Start partnerships. CPA firms performed 25 of these audits, with OSA staff performing the remaining 16 audits. All but one report were issued by June 30, 2007.
OSA’s goal is to complete and release all 45 Smart Start audits for the 2006- 07 fiscal year by April 30, 2008. It is anticipated the more timely release of the audit reports will allow the North Carolina Partnership for Children and the local partnerships to more quickly address identified deficiencies and to make the necessary improvements to ensure accountability of state funds.
Annual Report 2007 | Financial Audit Division
Officefficefficefficeffice ofof thethethe statestatestatestate auditorauditorauditorauditorauditorauditorauditor mainmainmainmain officeofficeofficeofficeofficeoffice andandand branchbranchbranchbranchbranchbranch locationslocationslocationslocationslocationslocationslocationslocationslocations
Morganton
AshevilleCharlotteFayettevilleWilmingtonGreenvilleEdentonRaleighGreensboroWinston- Salem 3 Increasing Efficiency... Exposing Fraud 1
North Carolina Office of the State Auditor
Personnel
To be a proactive State agency, OSA must be a responsible manager of its personnel. After selecting the best qualified applicants, OSA must then provide quality training to employees and a quality control review of employees work product.
Recruiting
OSA’s goal is to build relationships with the right applicants. This will reduce turnover and eliminate the waste that frequent turnover creates.
OSA continues its efforts to hire talented, skilled staff by recruiting on university campuses across the state. We continue to work with campus faculty to participate in faculty/ student meetings, accounting classes and other events. Significant effort is made to identify applicants who want to be challenged and provide a service to the public.
In addition, OSA has made great strides in its internship program. Internships provide individuals an opportunity to perform meaningful, career- related work with our office prior to their final year in school. If that is successful, the applicants will be invited to begin their career with OSA. This program has enabled OSA to hire very talented individuals who are looking for a long- term relationship with our office.
Training
OSA continues to work towards the goal of more effective and efficient audits. These efficiency gains allow OSA to utilize its resources to do more with the current auditors and staff positions. Training for OSA audit staff in 2007 included eLearning and a followup to the 2006 AuditWatch curriculum. Efficiency levels were analyzed and AuditWatch provided OSA with feedback in areas that needed improvement. AuditWatch also provided OSA with training in using analytics as another tool for more effective audits.
Skills needed by OSA staff include the ability to assess the risk of fraud in an audit and how to respond to those risks. In May 2007, OSA provided training to its entire staff on fraud detection and interviewing skills designed to aid in the detection of fraud.
Technical skills are not all that is needed for OSA staff to accomplish the goals and objectives of the office. OSA managers and supervisors need skills to manage their teams and maximize their team’s productivity. Spectrum Development provided training to OSA mangers and supervisors to aid them in training, retaining and managing their audit staff.
Quality Controls
OSA’s work product is governed by strict adher­ence
to professional standards promulgated by gov­ernment
agencies and professional organizations including the Governmental Accounting Standards Board, the Financial Accounting Standards Board, the Federal Office of Management and Budget, the Government Accountability Office, the American Institute of Certified Public Accountants, and vari­ous
state and federal laws and regulations. These standards require that auditors remain indepen­dent,
be technically proficient and receive continu­ing
professional education, obtain sufficient appro­General
Administration 32 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | General Administration
priate evidence to support conclusions, and issue reports that clearly communicate audit results.
OSA has a control system to ensure the quality of audit work. The system includes an experienced senior auditor in a Quality Control position, supervisory review of all work product, and management review of audit reports and critical supporting workpapers to ensure that OSA delivers audits and reports with efficiency, expertise and consistency. OSA monitors the effectiveness of its quality control system by having staff who did not participate in an audit periodically review the work. To uphold the standards of the supervisory review, OSA’s goal is that all newly hired Supervisor level employees and above in the financial audit division have a valid CPA license, or the merit- based equivalent in work experience.
Another layer of OSA review exists. The Agency receives a peer review every three years under the direction of the National State Auditors Association. During the peer review, members of audit staffs from other states review the office’s quality control system and workpapers for compliance with auditing standards. The most recent peer review was performed in July 2006 and resulted in a clean opinion on the quality control system.
Processing & Publication
With over 190 OSA employees, the publishing of audits, reports and reviews is a complicated and time consuming process. Magnified by the sensitive nature of the audit subject matter, OSA’s administrative staff must be detail minded and highly organized. The goals of accuracy and timeliness are the staff’s top priorities. However without effective publication, the audit, report or review would go unnoticed.
Publication of the audits, reports and reviews is an essential part of OSA’s proactive posture. A report exposing an instance of fraud, waste or abuse of taxpayers’ resources, if publicized by the statewide news media, becomes an effective tool for the deterrence of future fraud, waste or abuse of taxpayers’ resources. OSA, through a positive relationship with the news media, can proactively deter others from committing similar acts of fraud, waste and abuse of taxpayer money.
Budgeting & Purchasing
OSA is the taxpayers’ watchdog against wasteful spending of State resources. To be an effective messenger, OSA must ensure that its resources are spent as wisely as possible.
OSA’s appropriated budget is approximately $ 16.6 million and the agency bills approximately $ 3.6 million for federal audit work. In addition to the central office in Raleigh, OSA has 9 branch offices throughout the State which our budget office is responsible for managing financially.
Budgeting and purchasing are governed by strict rules and regulations. An independent CPA firm annually conducts a financial audit of the office and routinely issues a clean opinion of its financial statements.
Management Information Systems ( MIS)
The MIS Division of the Office of the State Auditor is charged with four primary objectives:
• Provide Information Technology services including Operational Support, Application Development, Infrastructure Management and Information Security to Agency Personnel
• Oversight of Senate Bill 991 compliance 33 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
• Enterprise Information Technology strategic planning for the Agency
• Information Technology tactical implementation in order to increase productivity, efficiency and security of critical business functions.
In addition to providing for the daily operational support for Agency personnel, MIS completed a number of major projects to enhance the efficiency, quality of service, and security of the Agency.
MIS worked closely with the Office of the State Controller to ensure the Agency met all technical requirements for the Beacon Project ( statewide payroll application slated for implementation in 2008). MIS also worked with ITS and the Enterprise Data Warehouse service ( as the first customer of the new Statewide Enterprise level service) to complete the Management Services and Nongovernmental Compliance Division’s Grants Compliance online application, which will greatly enhance the operational capabilities of that Division. MIS has completed an internal upgrade of the Agency Intranet, completing a change over from a dynamic site to an industry standard portal technology designed to encourage collaboration among personnel and to enable a more efficient workflow during audits. In conjunction with the portal upgrade, MIS piloted an e- Learning initiative to make training more efficient and cost effective.
In addition, MIS has upgraded the Agencies network infrastructure to meet ESAP requirements and has tested and implemented a new network Intrusion Prevention System ( IPS) to ensure the security of sensitive Agency information. The Agency servers have been upgraded to latest versions and the capacity has doubled. Finally, a single comprehensive Business Continuity Plan ( BCP) / Continuation of Operations Plan ( COOP) was developed and tested to meet the State requirements of both documents and to address Pandemic Influenza planning requirements. Also, MIS is working closely with ITS to securely merge the OSA network infrastructure into the State of North Carolina’s architecture.
In 2008, the MIS Division will continue to provide quality operational support to Agency personnel. In addition, the MIS Division will aggressively work to provide technologies to Agency personnel that will improve the efficiency and quality of Agency critical business functions. The statewide payroll system, Beacon, will be implemented in March 2008. In the first quarter of 2008 the Management Services and Nongovernmental Compliance Division application will be made available to all customers and all Agency personnel will complete comprehensive training on the new internal portal. The e- Learning system will be expanded by incorporating an advanced Learning Management System solution. This will lead to expanded education and training opportunities including the ability to make vital information available via web casting. In addition, an Agency wide e- Recruiting solution will be designed and implemented to assist in the recruitment and hiring of quality candidates for open Agency positions. Finally, infrastructure and security needs will continue to be assessed and improved where feasible. 34 Increasing Efficiency... Exposing Fraud
Appendix A
The following reports are listed in reverse chronological order by audit type and were issued from July 1, 2006 through the date of this annual report:
Annual Report 2007 | Appendix A
Report Number Report Title Release Date
FCA- 2007- 2109 Brunswick County Clerk of Superior Court - Fiscal Control Audit 9/ 26/ 2007
FCA- 2007- 2178 Rockingham County Clerk of Superior Court - Fiscal Control Audit 9/ 25/ 2007
FCA- 2007- 2157 Martin County Clerk of Superior Court - Fiscal Control Audit 9/ 12/ 2007
FCA- 2007- 2127 Dare County Clerk of Superior Court - Fiscal Control Audit 7/ 10/ 2007
FCA- 2007- 2137 Graham County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 2007
FCA- 2007- 2174 Polk County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 2007
FCA- 2007- 6094 The North Carolina School of Science and Mathematics - Fiscal Control Audit 6/ 29/ 2007
FCA- 2007- 2196 Wilkes County Clerk of Superior Court - Fiscal Control Audit 6/ 28/ 2007
FCA- 2007- 2160 Mitchell County Clerk of Superior Court - Fiscal Control Audit 6/ 28/ 2007
FCA- 2007- 2121 Clay County Clerk of Superior Court - Fiscal Control Audit 6/ 25/ 2007
FCA- 2007- 2143 Haywood County Clerk of Superior Court - Fiscal Control Audit 6/ 21/ 2007
FCA- 2007- 2179 Rowan County Clerk of Superior Court - Fiscal Control Audit 6/ 14/ 2007
FCA- 2007- 2175 Randolph County Clerk of Superior Court - Fiscal Control Audit 6/ 11/ 2007
FCA- 2007- 2104 Ashe County Clerk of Superior Court - Fiscal Control Audit 6/ 11/ 2007
FCA- 2007- 2135 Gaston County Clerk of Superior Court - Fiscal Control Audit 5/ 30/ 2007
FCA- 2007- 2134 Franklin County Clerk of Superior Court - Fiscal Control Audit 5/ 23/ 2007
FCA- 2007- 2172 Person County Clerk of Superior Court - Fiscal Control Audit 5/ 17/ 2007
FCA- 2007- 2163 Nash County Clerk of Superior Court - Fiscal Control Audit 4/ 27/ 2007
FCA- 2007- 2131 Durham County Clerk of Superior Court - Fiscal Control Audit 4/ 27/ 2007
FCA- 2006- 2158 McDowell County Clerk of Superior Court - Fiscal Control Audit 4/ 16/ 2007
FCA- 2007- 2167 Orange County Clerk of Superior Court - Fiscal Control Audit 4/ 12/ 2007
FCA- 2006- 3400 Treasurer, Department of the State - Fiscal Control Audit 1/ 30/ 2007
FCA- 2006- 6800 Community Colleges, Department of - Fiscal Control Audit 1/ 26/ 2007
FCA- 2006- 4160 Controller, Office of the State - Fiscal Control Audit 9/ 14/ 2006
FIN- 2006- 6086 Elizabeth City State University - Financial Statement Audit 9/ 14/ 2007
FIN- 2006- 6070 North Carolina Agricultural and Technical State University - Financial Statement Audit 8/ 23/ 2007
FIN- 2006- 6090 North Carolina Central University - Financial Statement Audit 8/ 17/ 2007
FIN- 2006- 6807 Brunswick Community College - Financial Statement Audit 8/ 7/ 2007
FIN- 2006- 6878 Sandhills Community College - Financial Statement Audit 8/ 7/ 2007
FIN- 2006- 6822 College of the Albemarle - Financial Statement Audit 7/ 27/ 2007
FIN- 2006- 6876 Sampson Community College - Financial Statement Audit 7/ 12/ 2007
FIN- 2006- 6808 Caldwell Community College and Technical Institute - Financial Statement Audit 6/ 29/ 2007
FIN- 2006- 6818 Central Piedmont Community College - Financial Statement Audit 6/ 29/ 2007
FIN- 2006- 6843 Blue Ridge Community College - Financial Statement Audit 6/ 29/ 2007
FIN- 2006- 6834 Forsyth Technical Community College - Financial Statement Audit 6/ 27/ 2007
FIN- 2006- 4205 North Carolina Turnpike Authority - Financial Statement Audit 6/ 27/ 2007 35 Increasing Efficiency... Exposing Fraud
FIN- 2006- 6844 Isothermal Community College - Financial Statement Audit 6/ 26/ 2007
FIN- 2006- 6862 Pitt Community College - Financial Statement Audit 6/ 26/ 2007
FIN- 2006- 6854 Montgomery Community College - Financial Statement Audit 6/ 25/ 2007
FIN- 2006- 8560 Wireless Emergency Telephone System Fund - Financial Statement Audit 6/ 25/ 2007
FIN- 2006- 6880 Southeastern Community College - Financial Statement Audit 6/ 22/ 2007
FIN- 2006- 6886 Alamance Community College - Financial Statement Audit 6/ 22/ 2007
FIN- 2006- 6806 Bladen Community College - Financial Statement Audit 6/ 22/ 2007
FIN- 2006- 6870 Robeson Community College - Financial Statement Audit 6/ 11/ 2007
FIN- 2006- 6850 Martin Community College - Financial Statement Audit 6/ 6/ 2007
FIN- 2006- 6892 Wayne Community College - Financial Statement Audit 5/ 31/ 2007
FIN- 2006- 6824 Craven Community College - Financial Statement Audit 5/ 30/ 2007
FIN- 2006- 6828 Durham Technical Community College - Financial Statement Audit 5/ 29/ 2007
FIN- 2006- 8550 NC Agricultural Financial Authority - Financial Statement Audit 5/ 29/ 2007
FIN- 2006- 6888 Tri- County Community College - Financial Statement Audit 5/ 23/ 2007
FIN- 2007- 8303 USS North Carolina Battleship Commission - Financial Statement Audit 5/ 23/ 2007
FIN- 2006- 6853 Mitchell Community College - Financial Statement Audit 5/ 22/ 2007
FIN- 2006- 6872 Rockingham Community College - Financial Statement Audit 5/ 17/ 2007
FIN- 2006- 4407 Town of Butner - Financial Statement Audit 5/ 17/ 2007
FIN- 2006- 4620 North Carolina State Ports Authority - Financial Statement Audit 5/ 17/ 2007
FIN- 2006- 6848 Lenoir Community College 5/ 8/ 2007
FIN- 2006- 6856 Nash Community College 4/ 23/ 2007
FIN- 2006- 6864 Randolph Community College 4/ 23/ 2007
FIN- 2006- 6826 Davidson County Community College 4/ 16/ 2007
FIN- 2006- 6894 Western Piedmont Community College 4/ 16/ 2007
FIN- 2006- 8730 Statewide Single Audit 4/ 13/ 2007
FIN- 2006- 8530 North Carolina Global Transpark Authority 4/ 12/ 2007
FIN- 2006- 6055 UNC - Asheville 4/ 12/ 2007
FIN- 2006- 4900 Crime Control and Public Safety, Department of 4/ 5/ 2007
FIN- 2006- 4600 Commerce, Department of 4/ 5/ 2007
FIN- 2006- 3510a Treasurer, Department of the State 4/ 5/ 2007
FIN- 2006- 4410 Health and Human Services - CAFR and Single Audit 4/ 4/ 2007
FIN- 2006- 6889 Vance- Granville Community College 4/ 4/ 2007
FIN- 2006- 8025 NC State Board of Elections 3/ 26/ 2007
FIN- 2006- 8410 Auditor, Office of the State 3/ 26/ 2007
FIN- 2006- 6060 UNC - Wilmington 3/ 22/ 2007
FIN- 2006- 6020 UNC - Chapel Hill 3/ 19/ 2007
FIN- 2006- 6092 NC School of the Arts 3/ 17/ 2007
FIN- 2006- 4350 Wildlife Resources Commission 3/ 16/ 2007
FIN- 2006- 4650 Employment Security Commission 3/ 16/ 2007
FIN- 2006- 6868 Roanoke- Chowan Community College 3/ 16/ 2007
FIN- 2006- 3700 Agriculture and Consumer Services, Department of 3/ 15/ 2007
FIN- 2006- 6040 UNC - Greensboro 3/ 15/ 2007
North Carolina Office of the State Auditor 36 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Appendix A
FIN- 2006- 6065 East Carolina University 3/ 15/ 2007
FIN- 2006- 4300 Environment and Natural Resources, Department of 3/ 13/ 2007
FIN- 2006- 4660 Information Technology Services 3/ 9/ 2007
FIN- 2006- 6800 Community Colleges, Department of 3/ 9/ 2007
FIN- 2005- 6090 North Carolina Central University 3/ 9/ 2007
FIN- 2006- 4200 Transportation, Department of 3/ 7/ 2007
FIN- 2006- 6858 Coastal Carolina Community College 3/ 2/ 2007
FIN- 2006- 6816 Central Carolina Community College 2/ 26/ 2007
FIN- 2006- 6050 UNC - Charlotte 2/ 14/ 2007
FIN- 2006- 6095 UNC Hospitals - NC Memorial Hospital 2/ 2/ 2007
FIN- 2006- 6082 UNC - Pembroke 1/ 30/ 2007
FIN- 2006- 2103 Anson County Clerk of Superior Court 1/ 29/ 2007
FIN- 2006- 4160 Controller, Office of the State 1/ 24/ 2007
FIN- 2006- 6080 Appalachian State University 1/ 16/ 2007
FIN- 2006- 3400 Treasurer, Department of the State 1/ 12/ 2007
FIN- 2006- 6084 Winston- Salem State University 1/ 10/ 2007
FIN- 2006- 6030 North Carolina State University 1/ 4/ 2007
FIN- 2006- 4700 Revenue, Department of 12/ 27/ 2006
FIN- 2006- 6075 Western Carolina University 12/ 20/ 2006
FIN- 2006- 4670 NC Education Lottery 12/ 19/ 2006
FIN- 2005- 8550 NC Agricultural Finance Authority 12/ 7/ 2006
FIN- 2006- 4800 Cultural Resources, Department of 11/ 22/ 2006
FIN- 2005- 6806 Bladen Community College 11/ 17/ 2006
FIN- 2006- 2197 Wilson County Clerk of Superior Court 11/ 16/ 2006
FIN- 2006- 2145 Hertford County Clerk of Superior Court 11/ 16/ 2006
FIN- 2006- 3000 Governor, Office of the 10/ 31/ 2006
FIN- 2006- 8303 USS NC Battleship Commission 10/ 30/ 2006
FIN- 2006- 2139 Greene County Clerk of Superior Court 10/ 23/ 2006
FIN- 2006- 2188 Tyrrell County Clerk of Superior Court 10/ 13/ 2006
FIN- 2007- 2115 Carteret County Clerk of Superior Court 10/ 13/ 2006
FIN- 2006- 2133 Forsyth County Clerk of Superior Court 10/ 10/ 2006
FIN- 2006- 2150 Johnston County Clerk of Superior Court 10/ 2/ 2006
FIN- 2006- 2185 Surry County Clerk of Superior Court 10/ 2/ 2006
FIN- 2006- 2166 Onslow County Clerk of Superior Court 9/ 28/ 2006
FIN- 2005- 6850 Martin Community College 9/ 27/ 2006
FIN- 2006- 2112 Cabarrus County Clerk of Superior Court 9/ 13/ 2006
FIN- 2006- 2108 Bladen County Clerk of Superior Court 9/ 11/ 2006
FIN- 2006- 2170 Pender County Clerk of Superior Court 9/ 11/ 2006
FIN- 2006- 2173 Pitt County Clerk of Superior Court 9/ 11/ 2006
FIN- 2006- 2177 Robeson County Clerk of Superior Court 8/ 29/ 2006
FIN- 2006- 2184 Stokes County Clerk of Superior Court 8/ 29/ 2006 37 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
FIN- 2006- 2107 Bertie County Clerk of Superior Court 8/ 29/ 2006
FIN- 2006- 2113 Caldwell County Clerk of Superior Court 8/ 29/ 2006
FIN- 2006- 2136 Gates County Clerk of Superior Court 8/ 17/ 2006
FIN- 2006- 2152 Lee County Clerk of Superior Court 8/ 7/ 2006
FIN- 2006- 2128 Davidson County Clerk of Superior Court 7/ 24/ 2006
FIN- 2006- 3510 Treasurer, Department of the State 7/ 24/ 2006
FIN- 2006- 2102 Alleghany County Clerk of Superior Court 7/ 24/ 2006
FIN- 2006- 2105 Avery County Clerk of Superior Court 7/ 20/ 2006
FIN- 2006- 2194 Watauga County Clerk of Superior Court 7/ 20/ 2006
FIN- 2006- 2180 Rutherford County Clerk of Superior Court 7/ 20/ 2006
FIN- 2006- 4500 Correction, Department of 7/ 20/ 2006
FIN- 2006- 2168 Pamlico County Clerk of Superior Court 7/ 14/ 2006
GRA- 2008- 0053 Review of The Salvation Army Charlotte State Grants 9/ 17/ 2007
GRA- 2008- 0039 Review of Teaching Academics for Life Learning Outreach Ministries State Grant 9/ 13/ 2007
GRA- 2008- 0042 Review of North Hills Child Care Center State Grant 9/ 13/ 2007
GRA- 2007- 0028 Review of Carolyns Little Castle State Grant 9/ 13/ 2007
GRA- 2008- 0049 Review of Life After Life Inc State Grant 9/ 11/ 2007
GRA- 2008- 0048 Review of Appletree Day Care Inc State Grant 8/ 30/ 2007
GRA- 2008- 0046 Review of Infants Palace Day Care Inc State Grant 8/ 23/ 2007
GRA- 2007- 0031 Review of The Kids Place Day Care State Grants 8/ 22/ 2007
GRA- 2008- 0055 Review of Tar Heel Volunteer Rescue Squad State Grants 8/ 17/ 2007
GRA- 2007- 0014 Review of North Carolina Fair Housing Center State Grant 7/ 20/ 2007
GRA- 2007- 0033 Review of Wayne Memorial Hospital State Grants 7/ 19/ 2007
GRA- 2007- 0032 Review of United Community Ministries State Grants 7/ 16/ 2007
GRA- 2007- 0034 Review of Wayne Uplift Resource Association Inc 6/ 22/ 2007
GRA- 2007- 0035 Review of Southeastern Family Violence Center State Grants 6/ 22/ 2007
GRA- 2007- 0036 Review of New Hanover Community Health State Grant 6/ 22/ 2007
GRA- 2007- 0029 Review of Little Angels Child Care Center State Grant 6/ 14/ 2007
GRA- 2007- 0030 Review of Save The Family Child Care State Grant 6/ 14/ 2007
GRA- 2007- 0025 Review of Prosperous Children Child Care 6/ 14/ 2007
GRA- 2007- 0027 Review of Anson County Domestic Violence Coalition Inc 6/ 7/ 2007
GRA- 2007- 0015 Review of Word of God Fellowship 4/ 9/ 2007
GRA- 2007- 0026 Review of Little Red Schoolhouse 3/ 28/ 2007
GRA- 2006- 0010 Review of Windows on the World 3/ 13/ 2007
GRA- 2007- 0021 Review of Blue Ridge Electric Membership Corp 3/ 6/ 2007
GRA- 2007- 0023 Review of Haywood Electric Membership Corp 3/ 6/ 2007
GRA- 2007- 0022 Review of Brunswick Electric Membership Corp 3/ 1/ 2007
GRA- 2007- 0018 Review of Parkwood Volunteer Fire Department 3/ 1/ 2007
GRA- 2007- 0020 Review of Tideland Electric Membership Corp 3/ 1/ 2007
GRA- 2006- 0011 Review of FirstHealth of the Carolinas, Inc 2/ 14/ 2007
GRA- 2006- 0013 Review of Sheltered Aid to Families in Emergencies ( SAFE) 2/ 5/ 2007 38 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Appendix A
GRA- 2006- 0007 Review of Sit In Movement, Inc 11/ 8/ 2006
GRA- 2006- 0008 Review of Bertie- Martin- Washington Community Development 11/ 8/ 2006
GRA- 2006- 0009 Review of Sandhills Mediation Center 11/ 8/ 2006
GRA- 2006- 0005 Review of Hope Pregnancy Care Center 10/ 26/ 2006
GRA- 2006- 0006 Review of Western Youth Network 10/ 26/ 2006
GRA- 2006- 0002 Review of Marine Corp Museum of the Carolinas 10/ 23/ 2006
GRA- 2006- 0003 Review of Club Fifteen 10/ 23/ 2006
GRA- 2006- 0004 Review of Caswell County Parish 10/ 23/ 2006
INV- 2007- 0323 North Carolina Department of Transportation 9/ 12/ 2007
INV- 2007- 0322 East Carolina University 9/ 7/ 2007
INV- 2007- 0321 North Carolina Department of Administration 9/ 4/ 2007
INV- 2007- 0320 North Carolina Department of Transportation 8/ 28/ 2007
INV- 2007- 0319 University of North Carolina at Greensboro 7/ 11/ 2007
INV- 2007- 0318 University of North Caroliina Hospitals/
University of North Carolina School of Pharmacy 6/ 28/ 2007
INV- 2007- 0317 North Carolina Department of Environment and Natural Resources 5/ 31/ 2007
INV- 2007- 0316 NC Department of Environment and Natural Resources/ Division of Waste Management 5/ 10/ 2007
INV- 2007- 0315 Wake Technical Community College 4/ 23/ 2007
INV- 2007- 0314 North Carolina Department of Cultural Resources 4/ 16/ 2007
INV- 2007- 0313 North Carolina School of Science and Mathematics 3/ 7/ 2007
INV- 2007- 0312 Elizabeth City/ Pasquotank Airport Authority 1/ 9/ 2007
INV- 2006- 0311 North Carolina Board of Cosmetic Arts Examiners 12/ 18/ 2006
INV- 2006- 0310 NC Dept of Environment and Natural Resources 11/ 14/ 2006
INV- 2006- 0309 North Carolina State University 9/ 20/ 2006
INV- 2006- 0308 North Carolina Department of Transportation 9/ 13/ 2006
INV- 2006- 0307 NC Department of Administration Division of Purchase and Contract 9/ 5/ 2006
INV- 2006- 0306 North Carolina State University 8/ 28/ 2006
INV- 2006- 0305 North Carolina Public Staff 7/ 19/ 2006
INV- 2006- 0303 North Carolina Agricultural & Technical State University 7/ 6/ 2006
INV- 2006- 0304 North Carolina Department of Health and Human Services 7/ 6/ 2006
ISA- 2007- 6816 Central Carolina Community College 9/ 18/ 2007
ISA- 2007- 6883 Stanly Community College 9/ 18/ 2007
ISA- 2007- 4300 North Carolina Department of Environment and Natural Resources 9/ 17/ 2007
ISA- 2007- 6814 Catawba Valley Community College 9/ 14/ 2007
ISA- 2007- 6864 Randolph Community College 9/ 14/ 2007
ISA- 2007- 6870 Robeson Community College 9/ 14/ 2007
ISA- 2007- 6838 Guilford Technical Community College 9/ 7/ 2007
ISA- 2007- 4410 North Carolina Department of Health and Human Services/
County Administration Reimbursement System 9/ 7/ 2007
ISA- 2007- 4660 Information Technology Services 9/ 4/ 2007
ISA- 2007- 6820 Cleveland Community College 8/ 22/ 2007 39 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
ISA- 2007- 6836 Gaston College 8/ 22/ 2007
ISA- 2007- 6861 Piedmont Community College 7/ 20/ 2007
ISA- 2007- 6840 Halifax Community College 7/ 20/ 2007
ISA- 2007- 6874 Rowan- Cabarrus Community College 7/ 18/ 2007
ISA- 2007- 6898 Wilson Technical Community College 7/ 16/ 2007
ISA- 2007- 6843 Blue Ridge Community College 7/ 13/ 2007
ISA- 2007- 6830 Edgecombe Community College 7/ 3/ 2007
ISA- 2007- 4500 North Carolina Department of Corrections 7/ 3/ 2007
ISA- 2007- 6804 Beaufort Community College 6/ 28/ 2007
ISA- 2007- 6088 Fayetteville State University 6/ 1/ 2007
ISA- 2007- 0740 North Carolina Department of Transportation 5/ 22/ 2007
ISA- 2007- 6082 UNC - Pembroke 4/ 23/ 2007
ISA- 2007- 4700 Revenue, Department of 11/ 17/ 2006
ISA- 2007- 4160 Controller, Office of the State 11/ 9/ 2006
ISA- 2007- 1000 North Carolina General Assembly 11/ 2/ 2006
ISA- 2007- 3300 Auditor, Office of the State 11/ 1/ 2006
ISA- 2006- 6086 Elizabeth City State University 7/ 21/ 2006
NGV- 2006- 9110 Mecklenburg Partnership for Children - Financial Statement Audit 7/ 30/ 2007
NGV- 2006- 9101 North Carolina Partnership for Children - Financial Statement Audit 7/ 16/ 2007
NGV- 2006- 9127 Buncombe County Partnership for Children Inc - Financial Statement Audit 6/ 29/ 2007
NGV- 2006- 9128 New Hanover County Partnership for Children Inc - Financial Statement Audit 6/ 28/ 2007
NGV- 2006- 9115 Avery County Partnership for Children Inc - Financial Statement Audit 6/ 26/ 2007
NGV- 2006- 9156 Caswell County Partnership for Children - Financial Statement Audit 6/ 25/ 2007
NGV- 2006- 9173 Pender County Partnership for Children - Financial Statement Audit 6/ 25/ 2007
NGV- 2006- 9133 Stokes Partnership for Children - Financial Statement Audit 6/ 21/ 2007
NGV- 2006- 9126 Alleghany Partnership for Children Inc - Financial Statement Audit 6/ 21/ 2007
NGV- 2006- 9135 Wake County Smart Start Inc - Financial Statement Audit 6/ 14/ 2007
NGV- 2006- 9121 Smart Start of Forsyth County - Financial Statement Audit 6/ 11/ 2007
NGV- 2006- 9140 Bertie County Partnership for Children Inc - Financial Statement Audit 6/ 4/ 2007
NGV- 2006- 9169 Martin- Pitt Partnership for Children Inc - Financial Statement Audit 6/ 4/ 2007
NGV- 2006- 9137 Wilson County Partnership for Children - Financial Statement Audit 5/ 30/ 2007
NGV- 2006- 9153 Bladen County Partnership for Children Inc - Financial Statement Audit 5/ 23/ 2007
NGV- 2006- 9105 Partnership for Children of Cumberland County Inc - Financial Statement Audit 5/ 23/ 2007
NGV- 2006- 9146 Lee County Partnership 5/ 8/ 2007
NGV- 2006- 9179 Scotland County Partnership 2/ 22/ 2007
NGV- 2006- 9134 Surry County Partnership 2/ 21/ 2007
NGV- 2006- 9118 Duplin County Partnership 2/ 21/ 2007
NGV- 2006- 9113 Stanly County Partnership 2/ 19/ 2007
NGV- 2006- 9183 Watauga County Partnership 2/ 19/ 2007
NGV- 2006- 9172 Onslow County Partnership 2/ 19/ 2007
NGV- 2006- 9177 Rockingham County Partnership 2/ 14/ 2007 40 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Appendix A
NGV- 2006- 9125 Wilkes County Partnership 2/ 13/ 2007
NGV- 2006- 9147 McDowell County Partnership 2/ 12/ 2007
NGV- 2006- 9178 Sampson County Partnership 1/ 30/ 2007
NGV- 2006- 9107 Halifax- Warren Partnership 1/ 25/ 2007
NGV- 2006- 9112 Region A Partnership 1/ 25/ 2007
NGV- 2006- 9154 Cabarrus County Partnership 1/ 16/ 2007
NGV- 2006- 9145 Iredell County Partnership 12/ 21/ 2006
NGV- 2006- 9120 Down East Partnership ( Nash, Edgecombe) 12/ 21/ 2006
NGV- 2006- 9116 Catawba County Partnership for Children 12/ 19/ 2006
NGV- 2006- 9106 Davidson County Partnership for Children Inc 12/ 19/ 2006
NGV- 2006- 9131 Robeson County Partnership 12/ 19/ 2006
NGV- 2006- 9149 Rowan County Partnership 12/ 19/ 2006
NGV- 2006- 9141 Columbus County Partnership 12/ 1/ 2006
NGV- 2006- 9123 Albemarle Partnership ( Camden, Currituck, Pasquotank) 12/ 1/ 2006
NGV- 2006- 9114 Ashe County Partnership 11/ 30/ 2006
NGV- 2006- 9142 Children and Youth Partnership for Dare County 11/ 30/ 2006
NGV- 2006- 9148 Moore County Partners for Children and Families 11/ 29/ 2006
NGV- 2006- 9158 Craven County Partnership 11/ 29/ 2006
NGV- 2005- 9157 Chowan- Gates- Perquimans Partnership 7/ 24/ 2006
NGV- 2005- 9167 Lincoln- Gaston County Partnership 7/ 20/ 2006
NGV- 2005- 9185 Yadkin County Partnership 7/ 20/ 2006
NGV- 2005- 9155 Carteret County Partnership for Children 7/ 17/ 2006
NGV- 2005- 9138 Anson County Partnership 7/ 6/ 2006
NGV- 2005- 9101 North Carolina Partnership For Children 7/ 6/ 2006
NGV- 2005- 9130 Randolph County Partnership 7/ 5/ 2006
NGV- 2005- 9150 Alamance County Partnership 7/ 5/ 2006
NGV- 2005- 9104 Cleveland County Partnership 7/ 3/ 2006
PER- 2007- 7226 Enterprise Project Management Office 7/ 26/ 2007
PER- 2007- 7227 State Childrens Health Insurance Program Claims Processing 7/ 24/ 2007
PER- 2007- 7225 New Vistas - Mountain Laurel Inc Mental Health Service Provider 5/ 15/ 2007
PER- 2007- 7219 Office Supplies Term Contract Administered by the Purchase and Contract Division 5/ 9/ 2007
PER- 2007- 7220 Economic Development Studies 5/ 2/ 2007
PER- 2007- 7223 Office of Indigent Defense Services 2/ 28/ 2007
PER- 2006- 7216 Internal Auditing in North Carolina Agencies and Institutions 9/ 28/ 2006
SAR- 2007- 3420 North Carolina Department of the Treasurer 4/ 24/ 2007
SAR- 2007- 6020 UNC - Chapel Hill 4/ 24/ 2007
SAR- 2007- 0673 North Carolina Division of Motor Vehicles 3/ 20/ 2007
SAR- 2007- 6095 UNC Hospitals - NC Memorial Hospital 1/ 25/ 2007
SAR- 2007- 6030 North Carolina State University 1/ 3/ 2007
SAR- 2007- 3600 Justice, Department of 1/ 3/ 2007
SAR- 2006- 6090 North Carolina Central University 10/ 2/ 2006 Increasing Efficiency... Exposing Fraud 41
Appendix B
North Carolina Office of the State Auditor
The OSA independently evaluates the state’s fiscal accountability and public program performance for North Carolina’s citizens and others. The office strives to assure that state government is executing its management responsibilities in compliance with applicable laws, rules, regulations, and policies. The office also evaluates whether sufficient management controls and policies exist to enable state agencies to most efficiently and effectively use public resources.
STATUTORY AUTHORITY
North Carolina General Statutes § § 147- 64.1- 64.14 set forth the duties and responsibilities of the State Auditor, and requires the State Auditor be independent of the organizations being audited. These statutes mandate that all state agencies and entities partially or entirely supported by public funds be subject to audit by the state auditor. These audits independently evaluate public program performance for the General Assembly, Governor, executive departments and agencies, governing bodies, and the general public. Specifically, the State Auditor independently examines and makes findings of fact on whether State agencies:
■ established adequate operating and administrative procedures, reporting systems, and elements of management control.
■ provided financial and other reports that disclose fairly, consistently, fully, and promptly all information necessary to demonstrate program performance.
■ collected, deposited, and properly accounted for all revenues and receipts arising from activities.
■ conducted programs and expended funds in an efficient and economical manner as well as in compliance with applicable laws and regulations
■ determined that programs effectively served the legislative intent.
OSA is also statutorily mandated to conduct certain audits, including the largest audit, the State’s Comprehensive Annual Financial Report ( CAFR). These audits are required to be conducted in accordance with appropriate professional standards.
The Investigative staff is statutorily mandated to investigate allegations of improper activities, which may occur as a result of misfeasance, malfeasance or nonfeasance by governmental employees or those receiving state money. Investigators are required to protect complainants who provide information to OSA related to these charges. This section operates under the supervision of the Chief Deputy State Auditor.
CONSTITUTIONAL AGENCY
The State Auditor is a constitutional officer listed in the North Carolina Constitution under Article III, § 7. The State Auditor is elected statewide every four years and is a member of the Council of State which also includes the Governor, Lieutenant Governor, Secretary of State, State Treasurer, Superintendent of Public Instruction, Attorney General, Commissioner of Agriculture, Commissioner of Labor, and Commissioner of Insurance.
Statutorytatutorytatutorytatutory and Constitutional Authority 42 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Contact Information
SENIOR MANAGEMENT TEAM
Leslie W. Merritt, Jr., CPA, CFP
State Auditor
Leslie_ Merritt@ ncauditor. net
( 919) 807- 7500
Kris Bailey, J. D.
Chief Deputy
Kris_ Bailey@ ncauditor. net
( 919) 807- 7665
Jeff Henderson, CPA, CISA,
Deputy State Auditor
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
Charles K. Duckett
Personnel Officer
Charles_ Duckett@ ncauditor. net
( 919) 807- 7617
James L. Forteorte
Director of Internal Operations and Legislative Affairs
James_ Forte@ ncauditor. net
( 919) 807- 7642
Cindy Gilliam
Controller
Cindy_ Gilliam@ ncauditor. net
( 919) 807- 7553
Timothy J. Hoegemeyer, J. D., MPA
General Counsel
Tim_ Hoegemeyer@ ncauditor. net
( 919) 807- 7564
Christopher F. Mears, J. D., MPP
Director of Public Affairs
Chris_ Mears@ ncauditor. net
( 919) 807- 7566
Patat Stussie
Executive Assistant to the Auditor
Pat_ Stussie@ ncauditor. net
( 919) 807- 7676
Lenny Supervilleuperville, Ph. D.
Chief Information Officer
Lenny_ Superville@ ncauditor. net
( 919) 807- 7625
AUDIT MANAGEMENT TEAM
Joyce Flowers, CPA
Specialty: Single Audit
Wilmington Branch
Joyce_ Flowers@ ncauditor. net
( 919) 807- 7550
Janet Hayesayes, CPM, CICA, MBA
Specialty: Services to nongovernmen­tal
groups
Janet_ Hayes@ ncauditor. net
( 919) 807- 7558
Linda Hollar, CPA
Specialty: Universities, UNC, UNC Hospitals, Asheville Branch
Linda_ Hollar@ ncauditor. net
( 919) 807- 7565
Frank L. Perryerry
Specialty: Investigations
Frank_ Perry@ ncauditor. net
( 919) 807- 7604
Lee Linker, CPA
Specialty: Quality Control
Lee_ Linker@ ncauditor. net
( 919) 807- 7583
Davidavid Nance, CPA
Specialty: Health Issues
David_ Nance@ ncauditor. net
( 919) 807- 7660
Carol Smith, CPA
Specialty: Community Colleges
Charlotte Branch
Greensboro Branch
Morganton Branch
Winston- Salem Branch
Carol_ Smith@ ncauditor. net
( 336) 585- 2513
Fayeaye Steele, CPA
Specialty: Clerks of Court
North Carolina State University
Fayetteville Branch
Greenville Branch
Edenton Branch
Faye_ Steele@ ncauditor. net
( 919) 807- 7589
Kenneth Barnette, CPA
Specialty: Performance Audits
Kenneth_ Barnette@ ncauditor. net
( 919) 807- 7540
Charles Williford, CPA, CITP, CISA, CFE, CPM
Specialty: Information Systems Audits
Charles_ Williford@ ncauditor. net
( 919) 807- 7627
Copies of reports issued by the Office of the State Auditor may be requested through the email link on the web site at www. ncauditor. net or by calling the main phone number. Other inquiries, comments, and suggestions may be made by contacting the main office or one of the staff members listed below.
N. C. Office of the Statetatetate Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
Contact Information Northorthorthorth Carolinaarolinaarolinaarolinaarolinaarolinaarolina Officefficefficefficeffice ofof thethethe Statetatetatetate Auditoruditoruditoruditoruditoruditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
OSA printed this report in- house as a cost saving measure for taxpayers.

Honesty • Integrity • Professionalism
2007 Annual Report & 2008 Strategic Plan
North Carolina Office of
the State Auditor
Lesl ie W. Merritt, Jr., CPA, cfp
Increasing Efficiency...
Exposing Fraud.
Increasing Efficiency... Exposing Fraud
3 Message from the Auditor
4 2008 Strategic Plan
8 Executive Summary
10 Investigative Division
18 Management Services &
Nongovernmental Compliance Division
21 Performance Audit Division
25 Information Systems Audit Division
27 Financial Audit Division
29 General Administration
32 Appendix A
39 Appendix B
40 Contact Information
Contents
Annual Report 2007 | Contents Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Message from the Auditor
The Office of the State Auditor ( OSA) has been labeled “ the taxpayers’ watchdog,” and with good reason. North Carolina’s Constitution requires the State Auditor to proactively evaluate State agencies in terms of the efficiency and effectiveness of their use of public resources. North Carolina General Statutes expand on this mandate and commission the State Auditor to determine whether programs effectively serve the legislative intent, and investigate allegations of “ misfeasance, malfeasance or nonfeasance” of those receiving State money.
I take these powers and responsibilities as a serious charge in the fulfillment of my role as State Auditor. Building on last year’s efficiency gains, I have appointed an experienced senior auditor into a Quality Control position to ensure that OSA delivers audits and reports with efficiency, expertise and consistency. Financial audits, which comprise the bulk of the work we do, provide accurate “ input” measures but lack a function to measure “ outputs,” i. e., a program’s performance. To fully measure the “ efficiency” and “ effectiveness” of the State’s use of public resources, personnel have been repositioned in a risk- based realignment to areas of growing risk such as the need for more scrutiny over the State’s grants to non- profits, and the measuring of actual “ bang for your buck” performance of ambitious State programs and entitlements.
Central to OSA’s mandate as “ the taxpayers’ watchdog,” we are focusing on our Investigative Division and the State Auditor’s Hotline in 2007 and 2008. With the new head of our Investigative Division possessing federal law enforcement experience, we are building an Investigative Task Force ( ITF) comprised of auditors and staff from Investigative, Performance, Nongovernmental Compliance, Financial and Information Systems divisions. Armed with the mission to investigate fraud, waste and abuse of State resources, the ITF will scrutinize the “ money flow” through State agencies and programs and will steer their focus towards areas of “ high risk” for such fraud, waste and abuse. Acting as a channel through which local citizens’ tips will flow to the ITF, the OSA will promote the State Auditor’s Hotline in carefully targeted public service announcements on television. Current plans are to concentrate on media markets that contain high concentrations of State employees who would logically be the most knowledgeable about fraud, waste or abuse of State resources.
The OSA has a critical mission in the functioning of State government. I recognize that the foundation upholding these powers is the responsibility to our taxpayers to fairly, consistently and independently evaluate State government’s use of public resources. Clearly, the Auditor’s powers are derived from State statutes and the Constitution, but the Auditor’s responsibility to the people arises out of being independently elected and entrusted to ensure their tax dollars are properly spent.
Sincerely,
Message from the Auditor Increasing Efficiency... Exposing Fraud
The Office of the State Auditor occupies a unique position in State government. The North Carolina Constitution, State statutes and the public trust require and expect the OSA to fairly, consistently and independently act as “ the taxpayers’ watchdog.” This strategic plan describes how OSA will perform this watchdog function in 2008.
Investigative Division
If the OSA is the taxpayers’ watchdog, then the Investigative Division is the watchdog’s keen sense of smell. Through citizens’ tips fed to the OSA through the State Auditor’s Hotline, the Investigative Division detects and exposes fraud, waste and abuse in State government.
In 2008, the Investigative Division will operate under new leadership. Building on the fine work done in the past, the new Director will use his professional experience to take investigations in a new direction. With his experience in investigating white collar crime such as political corruption and financial fraud for the FBI, and experience in identifying conflicts of interest and accountability issues for the State Ethics Commission, the Division will be able to discover new leads and open more doors inside and outside State government.
Investigative Task Force
Building on the team- centered approach in 2006- 07, the OSA is launching a new entity labeled the Investigative Task Force ( ITF). Led by the new head of the Investigative Division and the Deputy State Auditor, the ITF is designed to steer investigations when a deeper vein of fraud, waste or abuse is detected while using standard auditing techniques. Being comprised of auditors and staff with investigative, performance, non- profit compliance, financial and information system backgrounds, the ITF will be well positioned to follow “ risk- based” leads and then drill down to the source of fraud, waste or abuse of public resources.
Hotline
For the OSA to fully function as “ the taxpayers’ watchdog,” we need eyes and ears to detect the occurrence of fraud, waste and abuse of public resources in our communities. As mandated by State law to “ periodically” publish the hotline, OSA plans to launch a statewide television ad blitz. This blitz will consist of 30 second public service announcements designed to publicize the State Auditor’s Hotline, and will begin in the fall 2007. By advertising the State Auditor’s Hotline, we multiply the numbers of eyes and ears in North Carolina’s communities and equip them with a tool to enact positive change in State government.
Management Services and Nongovernmental Compliance Division ( MS& NGCD)
The process of issuing State grants to non- profits ( grantees) and enforcing compliance with State law has been an area of growing concern to the public, and is an area of increasing focus for OSA. We have found that most grantees want to comply with their grant requirements but some
2008 Strategic Plan
Annual Report 2007 | Strategic Plan Increasing Efficiency... Exposing Fraud
lack the skills or knowledge to do so. To increase compliance and streamline the process in 2008, OSA will focus on implementing the Grants Information Center ( GIC) online reporting system. Successful implementation of the GIC system will greatly increase the accuracy and the timeliness of the grant’s data to all interested parties, while significantly decreasing the workload of the grantees, the funding agencies and the Division.
Training
Training is an important function of MS& NGCD and the OSA plans to improve its efforts in 2008 by offering both live and online grants training. Plans are to conduct a minimum of 6 live sessions per month, in addition to setting up and offering online courses in an e- Learning format. An important part of training is providing information to grantees and funding agencies that is relevant to their particular circumstances. Con­sequently,
the OSA issues quarterly Best Practices newsletters to all grantees and funding agencies, provides research and reporting assistance via tele­phone
and email, and provides grantees and fund­ing
agencies with online grant reporting documents and formats dictated by the reporting statutes.
Compliance Reporting & Examinations
Each grantee that accepts public money should be eager to show how that money was spent for the public good. Compliance reporting is a means for each grantee to embrace transparency and take pride in fulfilling each obligation under State law and within their grant’s requirements. Moreover, the subsequent processing of compliance reports is an important benchmark in how effective OSA is at upholding compliance and accountability. Our goal for 2008 is to continue efforts to reduce the number of noncompliant grants.
Occasionally, circumstances produce the need for a more in- depth accounting of a grantee and its stewardship over its State grant. As a result, the OSA began a process of grant examinations in June 2006. For Fiscal Year 2007, OSA initiated 25 grant examinations ( 21 completed) that resulted in OSA recommending repayment of $ 419,000 in grant funds, equal to an average of $ 20,000 per examination. The number of these examinations may increase in 2008 to include as many as 40 reports by the end of that fiscal year. Furthermore, the OSA plans to conduct separate monitoring examinations of funding agencies. The Division’s goal is to complete 12 separate agency monitoring examinations by the end of the next fiscal year.
Information Systems Audit Division
Information is the commodity of the twenty- first century. To fulfill OSA’s constitutional mandate in the information age, the OSA deploys its IS Audit Division using a blend of savvy technology and traditional auditing skills to confirm the efficient and effective use of public resources in State government.
Strategic Reviews
One of the Division’s most promising new tools is the Strategic Review ( SAR). In 2006- 07, the Di­vision
used SARs to expose almost 27,000 invalid Social Security Numbers in 6 separate State enti­ties.
Perpetrators used these invalid SSNs to either gain State employment or obtain valid State identi­fication.
Using this success as a springboard, OSA plans to conduct more SARs in 2008 on a variety of issues not limited to the use of invalid SSNs.
North Carolina Office of the State Auditor Increasing Efficiency... Exposing Fraud
IWAYS Pilot
Streamlining the flow of information in the
digital age is essential to performing accurate and
timely reviews. In 2007- 08, OSA is conducting a
pilot project using the IWAYS interface to directly
access agencies’ data through an encrypted
information tunnel with the ability to retrieve that
data on demand. This system offers a seamless flow
of information as opposed to the current system
of a manual “ cut and paste” operation by agency
personnel.
Increasing the frequency
of access to information
is an additional benefit of
IWAYS. Currently, extract
files are obtained annually
by OSA’s IS Audit Division
who then hand- off the files
to the Financial Division for
their analysis. With IWAYS,
the IS Audit Division can
directly access the needed
information in real time
or on a consistent periodic
basis ( e. g., monthly).
Data Mining/ Warehousing
Accessing information on site can stall audits
and investigations and disrupt an agency’s
operations. In consultation with a national data
mining expert from Brigham Young University,
the OSA began data mining and data warehousing
information on its own computer servers to
remove every obstacle in the path of progress.
Going into 2008, the IS Audit Division is poised
to conduct operations such as trend analysis and
fraud routines on large chunks of data that have
been mined and warehoused. Once this project
is complete, the OSA will be able to investigate
suspicious trends in an agency’s financial receipts,
expenditures, and payroll expenses, and run fraud
routines on unique data profiles.
Performance Audit Division
Compared to other OSA divisions, the
Performance Audit Division is uniquely
engineered to evaluate whether State programs are
reaching their goals. OSA
has been able to shift some
of its productivity gains
made in 2006- 07 to expand
the Performance Audit
Division which specifically
concentrates on efficiency
and effectiveness of State
government programs. In
2008, the Division plans to
conduct more performance
audits than in 2007, equip
performance auditors with
additional tools through new
training, and provide greater
flexibility to meet emerging
needs when they arise.
Questions have arisen regarding the NC
General Assembly’s newly instituted Legislative
Program Evaluation Division and how this entity
compares with OSA’s Performance Audit Division.
Unlike the program evaluations conducted by the
legislature, OSA’s Performance Audit Division
is independent from other government entities
and reports directly to the public instead of to
legislative committees. Also, the Performance
Audit Division conducts rigorous audits according
Annual Report 2007 | Strategic Plan
The Performance
Audit Division
is uniquely
engineered to
evaluate whether
State programs
are reaching their
goals.
Increasing Efficiency... Exposing Fraud
to strict auditing standards, while the legislature’s program evaluations will be assessments of the appropriateness of any given program. Because the OSA is concerned with maintaining efficiency and effectiveness of existing programs, OSA welcomes the legislature’s new program as another set of eyes to evaluate goals and performance measures in State government.
Greater Flexibility
An excellent example of greater flexibility in the OSA’s Performance Audit Division is the 2007 audit of New Vistas Mountain Laurel, Inc. Mental Health Service Provider ( NVML), and the several ongoing performance audits in the area of mental health. As a direct result of requests by North Carolina General Assembly members and local leaders, the OSA was able to prioritize audits and divert resources to meet emerging needs because of greater flexibility built into the system. In 2008, OSA will build on this success and become even more flexible to tackle new issues and satisfy requests when they arise.
Conduct More Audits with Impact
A 2006 OSA performance audit found that the State’s internal audit function is inadequately staffed and is in need of more direct guidance from the General Assembly. Internal auditors are the first line of defense that provide independent assurance on the effectiveness and efficiency of a program. Based on the findings and recommendations from this audit, the General Assembly enacted the North Carolina Internal Audit Act which requires large agencies to devote resources and attention to internal auditors. In 2008, the OSA will conduct more audits designed to make a significant impact on the State of North Carolina.
Financial Audit Division
The Financial Audit Division is charged with some of OSA’s biggest responsibilities such as annual financial statement audits and reviews of the State’s sixteen universities and fifty- eight community colleges. In addition, this Division conducts one of the largest financial audits, the Comprehensive Annual Financial Report or CAFR, which contains the annual financial statements for the state of North Carolina as a whole. Because of the Division’s access and broad reach across the State, in 2008 they will become a critical component of the new Investigative Task Force.
Financial is OSA’s core division and biggest user of available resources. In 2006, OSA contracted with AuditWatch to refocus Financial’s auditors and staff to improve the efficiencies in which they conduct their audits. By committing to AuditWatch’s efficiency principles, Financial’s auditors and staff have cut inefficiencies, improved quality and have expanded productivity. That means that significant resources are now available to extend the reach of the OSA. Specifically, Financial would be able to address the critical need to conduct fiscal control audits on State agencies that have not been reviewed in the recent past.
North Carolina Office of the State Auditor 10 Increasing Efficiency... Exposing Fraud
Investigative Division
• In 2008, the Investigative Division will operate under new leadership with experience in investigating white collar crime such as political corruption and financial fraud for the FBI, and experience in identifying conflicts of interest and accountability issues for the State Ethics Commission.
• Since 2005, OSA reduced the number of open cases by 76% ( 120 to 29). This is a substantial accomplishment of increased efficiency given the fact that we received an average of 135 new cases a year since 2005.
• OSA reduced the average case age to 118 days from 315 days in 2005. This represents a reduction of 63%.
• OSA is launching a new entity termed the Investigative Task Force ( ITF) designed to steer investigations when a deeper vein of fraud, waste or abuse is detected while using standard auditing techniques.
• OSA is launching a statewide television ad blitz of a 30 second public service announcement beginning in the fall 2007 to publicize the State Auditor’s Hotline as mandated by State law.
Management Services and Nongovernmental Compliance Division
• During FY 2007, OSA trained 4,535 personnel from funding agencies or grant recipients in 72 training sessions. The total number of participants trained since August 2005 is 8,500.
• The Division began conducting agency and grantee examinations in June 2006. For Fiscal Year 2007, OSA has initiated 25 grant examinations ( 21 completed) that resulted in OSA recommending repayment of $ 419,000 in grant funds, equal to an average of $ 20,000 per investigation.
• As of June 30, 2007, OSA has dropped the grantee noncompliance rate to 18.5% reflecting the proper accounting of an additional $ 32 million.
• OSA, in conjunction with the Office of State Personnel, established the Effective Grants Administration Certificate Program resulting in 63 personnel from grantees and funding agencies earning certificates during Fiscal Year 2007
• OSA has shortened the processing time for grantee reports from 5 months in 2005 to approximately 3 days of receipt in 2007.
Executive Summary
Annual Report 2007 | Executive Summary Increasing Efficiency... Exposing Fraud 11
Performance Audit Division
• The NC General Assembly enacted the North Carolina Internal Auditing Act based on a 2006 Performance Audit on internal auditors in State agencies.
• An audit of the State Child Health Insurance Program ( SCHIP) identified $ 16,000,000 in annual savings and $ 3,500,000 in one- time savings if the State moved the responsibility for SCHIP medical claims processing from the State Health Plan to the Division of Medical Assistance.
• The OSA audited the Office of Indigent Defense Services and found that their policies and procedures did not adequately ensure poor defendants received competent legal representation, and that attorneys representing poor defendants were not sufficiently independent of judicial influence.
Information Systems Audit Division
• One of the IS Audit Division’s most effective tools is the Strategic Review ( SAR). In 2006- 07, the Division used SARs to expose almost 27,000 invalid Social Security Numbers in 6 separate State entities.
• In 2007- 08, OSA is conducting a Pilot project using the IWAYS interface to directly access agencies data through an encrypted information tunnel with the ability to retrieve that data on demand.
• The OSA is completing a data mining / data warehousing operation to conduct trend analysis and fraud routines on large chunks of data such as agency financial receipts and expenditures, payroll expenses, and unique data profiles such as SSNs of new driver��s licenses from DMV.
Financial Audit Division
• Bring Financial’s access and broad reach into Universities, Community Colleges and CAFR onto the Investigative Task Force.
• Continue efficiency gains to expand the productivity of all OSA divisions.
North Carolina Office of the State Auditor 12 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Investigative Division
OSA’s Investigative Division is one of its most effective watchdog tools for investigating allegations of fraud, waste and abuse of State resources. Relying on State constitutional and statutory authority, this arm of the OSA exposes fraud and State government waste by investigating tips received through the State Auditor’s confidential hotline.
The majority of tips that lead to investiga­tions
come from OSA’s 24- hour, toll- free hotline
[ 1- 800- 730- TIPS ( 8477)]. This Hotline is designed for state employees and the general public to re­port
activities they believe may be illegal or im­proper.
Allegations of fraud, waste and abuse may also be reported by traditional mail or via email at
hotline@ ncauditor. net.
To protect the integrity of tips, allegations of improper governmental activities are strictly confidential. In addition, state law provides protection from retaliation or discrimination for whistleblowers who report improper or illegal activities to the State Auditor.
Statistics
We have made great strides in detecting and preventing fraud, waste and abuse of State resources in 2007. We built on our 2006 accomplishments by reducing the number of open cases, completing cases with greater efficiency which reduced the average age of cases, while simultaneously investigating newly reported allegations.
Due to an increase in efficiency, the number of open cases has been steadily declining from 120 in 2005 to 29 in 2007, equaling a 76% decrease. Comparing fiscal 2007 with fiscal 2006, we reduced the number of open cases by 36% ( 29 from 45). This is a substantial accomplishment of increased efficiency given the fact that we received 139 new cases during this fiscal year. Consistent with these numbers is the decrease in the average case age. In 2005, the average case age was 315 days. By 2006 FYE, we reduced the average case age to 226 days, a reduction of over 28%. Currently, we reduced the average case age to 118, which is a reduction of 63% since 2005.
Goals
The goals for the remainder of 2007 and into 2008 are to effectively promote the State Auditor’s Hotline, launch the Investigative Task Force, and increase the efficiency and effectiveness of handling multiple investigations simultaneously.
The promotion of the State Auditor’s Hotline is mandated by statute and has proven to be the tip source for the majority of investigations leading to direct savings for the taxpayers. In the spring of 2007, OSA advertised the Hotline with unpaid promotions in State employee paycheck slips and automatic draft forms. This method provides important coverage, but is inherently limited. In the fall of 2007, OSA will launch a statewide television ad blitz featuring a 30 second spot designed to expose fraud, waste and abuse in State government. This one area is unique in that money spent to promote the Hotline will likely reap a far greater amount in savings to the taxpayers when fraud, waste and abuse of State money is uncovered. Timing of this promotion is key because the Investigative Division
Investigative Division Increasing Efficiency... Exposing Fraud 13
must have the ability to handle a sharp increase in
new cases. With the Division’s increase in efficiency
resulting in a lower number of open cases, we
believe that the fall of 2007 is the optimal time.
Building on the team- centered approach in
2006- 07, the OSA is launching a new entity labeled
the Investigative Task Force ( ITF). Led by the
new head of the Investigations Division and the
Deputy State Auditor, the ITF is designed to steer
investigations when a deeper vein of fraud, waste
or abuse is detected while
using standard auditing
techniques. Being comprised
of auditors and staff with
investigative, performance,
non- profit compliance,
financial and information
system backgrounds, the
ITF will be well positioned
to follow “ risk- based” leads
and then drill down to the
source of fraud, waste or
abuse of public resources.
A portion of 2006- 07’ s
efficiency gains will be put
to good use in the Investigative Division. Because
promotion of the Hotline will result in more tips,
more investigators will be needed as part of other
auditing teams. OSA plans to add more supervisor
and staff positions to the Investigative Division in
2008. OSA believes this will bring greater flexibility
to investigations and allow the Division to handle
multiple investigations simultaneously.
The following are summaries of the more notable
cases in Fiscal Year 2006- 2007. A complete list of
reports is detailed in Appendix A.
NORTH CAROLINA DEPARTMENT
OF ADMINISTRATION – DIVISION OF
PURCHASE AND CONTRACT
The Office of the State Auditor received a number
of allegations regarding a state term contract for tire
retreading. The allegations primarily concerned
a contractor who violated provisions of the
contract regarding charges for repairs, tire casing
identification, and price adjustments.
Auditors found the
contractor performed an
unusually high percentage
of spot repairs under the
provisions of the tire retread
contract. Review of invoices
to eight Local Education
Authorities ( LEA’s) and one
North Carolina Department
of Transportation ( DOT)
division revealed the
contractor charged for
the maximum three spot
repairs on 99.1% of the
9,900 tires retreaded during
a sample period. Other tire
retread retailers and industry experts indicated
it is not routine to perform three spot repairs per
tire for on- the- road tires. Auditors estimated the
contractor may have overcharged the local school
districts and DOT a minimum of $ 361,000 per
year by maximizing spot repair charges on almost
every tire. Auditors recommended the Department
of Administration-- Division of Purchase and
Contract ( P& C) eliminate the line- item charge for
spot repairs to halt the incentive to maximize repair
charges. In addition, P& C should monitor the
contractor’s performance and evaluate the awarding
North Carolina Office of the State Auditor
Because promotion of
the Hotline will result
in more tips . . .
OSA plans to add
more supervisors and
staff positions to the
Investigative Division
in 2008.
14 Increasing Efficiency... Exposing Fraud
of future contracts given the concerns raised.
Auditors also discovered the contractor violated contractual provisions related to price adjustments and itemized pick- up lists. The contractor changed the way it invoiced charges for spot repairs without notifying P& C as required by the contract terms. Further, the contractor failed to provide itemized lists of each tire casing picked up by the contractor resulting in two LEA’s receiving the wrong retread tires in return. OSA recommended the contractor comply with all contract provisions by notifying P& C of price changes and developing an inventory pick- up sheet that identifies each tire picked up for retreading.
UNIVERSITY OF NORTH CAROLINA HOSPITALS / UNIVERSITY OF NORTH CAROLINA SCHOOL OF PHARMACY
The Office of the State Auditor received an allegation through the State Auditor’s Hotline that the Pharmacy Director for the University of North Carolina Hospitals requested reimbursements from UNC Hospitals and the University of North Carolina at Chapel Hill’s School of Pharmacy for identical travel expenses. The complainant also alleged that the Pharmacy Director received improper reimbursements for cellular telephone expenses.
An investigation of these allegations found that the Pharmacy Director received over $ 2,300 in im­proper
reimbursements for travel and other expens­es.
In addition, auditors found that the Pharmacy Director improperly received over $ 2,300 for the reimbursement of cellular telephone charges. The Director reimbursed the University $ 1,202 upon the initial discovery of the improper payments.
In compliance with State law, the State Auditor notified the North Carolina Attorney General and appropriate law enforcement agencies of apparent instances of malfeasance, misfeasance, or nonfeasance by an officer or State employee. In addition to other recommendations, Auditors recommended that the Pharmacy Director reimburse the UNC School of Pharmacy and UNC Hospitals for the balance of the improper payments.
WAKE TECHNICAL COMMUNITY COLLEGE
At the request of the President of Wake Technical Community College, auditors conducted a special review of contract and procurement activities involving the Information Technology Services Division of the College. The review determined that Wake Tech’s Chief Information Officer fabricated a vendor quote to facilitate the award of a contract to a local business for just under $ 10,000. In another instance, the Chief Information Officer violated college policy by awarding a $ 10,400 contract to the same local business without obtaining formal proposals. Auditors also concluded that Wake Tech’s Executive Vice President’s approval of these transactions and personal friendship with the owner of the local business created the appearance of a conflict of interest.
OSA recommended that the College President take appropriate disciplinary action regarding the actions of the Chief Information Officer. OSA also recommended that Wake Tech’s Budget Office provide additional training to purchasing designees to ensure compliance with procurement policies
Annual Report 2007 | Investigative Division 15 Increasing Efficiency... Exposing Fraud
and procedures. A final recommendation called for the establishment of a conflict of interest policy that applies specifically to staff involved in the procurement process at Wake Tech
NORTH CAROLINA DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES – DIVISION OF WASTE MANAGEMENT
The Office of the State Auditor received an allegation through the State Auditor’s Hotline concerning a Processed Scrap Tire Material – Market Development Grant awarded by the Division of Waste Management. The purpose of the grant was to provide funding for a molding system that would produce rubber mats from recycled tire material. Allegedly, a tire recycling company that received the $ 320,000 grant failed to fulfill the grant requirements including specified levels of production and sales.
Auditors concluded the tire recycling company initially intended to create a sustainable rubber mat business. However, after receiving the grant award and in the course of developing the mat- making process, the company was unable to realize anticipated production and sales. To recover a portion of the original investment, auditors concluded the company set up and ran the mat- making machine to obtain the initial grant payment and then fabricated documents to fulfill the grant requirements and obtain subsequent payments from the Division of Waste Management. OSA recommended that the Division of Waste Management consider legal action to recover the entire grant award. The findings were also referred to the State Bureau of Investigation.
NORTH CAROLINA DEPARTMENT OF CULTURAL RESOURCES / FRIENDS OF THE MUSEUM, NORTH CAROLINA MARITIME MUSEUM, INC. / GALLANT’S CHANNEL PROPERTY TRANSACTION
Following concerns from some Council of State members and a written request from the Secretary of the Department of Cultural Resources, the Office of the State Auditor conducted a special review of a transfer of property from a non- profit organization to the State of North Carolina and the funding of a boat race and festival known as “ Pepsi Americas’ Sail 2006.” Concerns included the lack of disclosure of outstanding debts against the property, questions regarding the value of the property, the possibility that the State was paying for the land a second time, and potential misuse of funds regarding the Tall Ships event. The investigation resulted in multiple findings regarding lack of signed agreements, vio­lation
of Natural Heritage Trust Fund regulations, improper notification of state officials, and poor cost control for the Tall Ships event.
In addition, the investigation presented additional information that clarified some outstanding issues. For example, the review determined the State provided $ 3.45 million for the purchase of the Gallant’s Channel property in 1996 with a total State investment of $ 8.9 million over the next 10 years. After considering various appraisals performed by different entities, the Office of the State Auditor estimated the property���s value exceeds $ 20 million.
The investigation revealed there was no signed agreement between the State of North Carolina and the Friends of the Maritime Museum regarding the ownership or development of the Gallant’s Channel property. As a result, the State had no control or
North Carolina Office of the State Auditor 16 Increasing Efficiency... Exposing Fraud
input over the development of the property. The
Friends of the Museum maintained legal title and
could have refused to transfer the property, sold the
property, or developed the site without recourse
from the State. Auditors recommended the State
develop written agreements for all property
transactions and the State Property Office review its
files to determine if similar arrangements exist.
In addition, auditors
found the State Property
Office failed to complete the
property acquisition process
after Council of State approval
in 1998 and the Department
of Cultural Resources did
not notify the State Property
Office when the property was
deeded to the State in 1999.
Further, the Council of State
was not properly informed of
outstanding liens filed against
the property in October
2006 prior to accepting the
property transfer. Auditors
recommended the State
Property Office review its files and require copies
of deeds before closing any property transaction
file. Further, the Office of the State Auditor
recommended the State Property Office disclose
all pertinent information to the Council of State
including providing details in writing in advance to
Council members for complex transactions.
Regarding the Tall Ships event, the investigation
discovered the Pepsi Americas’ Sail 2006, LLC did
not have signed contracts with vendors for major
services. The lack of signed contracts contributed
to the cost escalation for the event. In addition,
insufficient revenue and inadequate cost control
resulted in financial losses for the Tall Ships event.
Several factors contributed to the event losses of
almost $ 2 million such as inadequate planning,
unrealistic attendance estimates, failing to designate
one individual or committee as ultimately in charge,
poor weather, lack of ships available for boarding,
and customer complaints
leading to discontinued
ticket sales and refunds.
OSA recommended the
Department of Cultural
Resources establish
procedures for organizing
and managing cultural and
entertainment events that
support North Carolina
arts and history to help
ensure the event’s success
while minimizing the risk of
financial loss.
NORTH CAROLINA
STATE UNIVERSITY
– FACILITIES OPERATIONS DEPARTMENT
Investigators received an allegation through the
State Auditor’s Hotline that an employee of the
North Carolina State University ( NCSU) Facilities
Operations Department wrote specifications for
building maintenance projects, participated in the
bid solicitation and selection process, and sold
equipment to a contractor that was awarded the
contract. This employee allegedly also oversaw
the performance of a convenience maintenance
contract awarded to the same contractor.
Annual Report 2007 | Investigative Division
The investigation resulted
in multiple findings
regarding lack of signed
agreements, violation of
Natural Heritage Trust
Fund regulations, improper
notification of state officials,
and poor cost control for the
Tall Ships event.
17 Increasing Efficiency... Exposing Fraud
Investigators found a project manager used his University position to derive a direct benefit for his private business. In his capacity as a Facility Mechanical Engineer, a NCSU project manager wrote specifications for the purchase and installation of a chiller while also being involved in the public bid review and amendment process. Investigators review of the project manager’s NCSU computer revealed the project manager was the owner of a company who supplied the chiller at a $ 10,000 mark- up to the company awarded the contract with NCSU. Investigators discovered other transactions between the project manager’s company and the contractor. In total, investigators identified another $ 14,000 in payments to the project manager’s company from the contractor. Investigators recommended NCSU establish policies related to construction contracts that require management to review information related to any subcontractors, suppliers, or other vendors for the primary contractor. In addition, management should perform periodic comparisons of NCSU employee information and vendor information to determine if any employee is receiving payments also as a vendor or contractor.
In addition, investigators discovered the project manager failed to properly disclose secondary employment information to management. Analysis of the project manager’s computer revealed numerous files containing purchase orders, invoices, job quotations, and correspondence related to his personal company. These documents were dated subsequent to his employment with NCSU and indicated ongoing business relationships with various heating and air conditioning contractors and vendors in North Carolina and other states. The project manager admitted he had not completed required secondary employment forms or notified management of his secondary employment activities. Further, the project manager acknowledged attempts to conceal these business relationships by portraying his wife as the owner of his private company and using a false business address in Kansas. OSA recommended NCSU ensure all employees complete a secondary employment form in accordance with State Personnel policies and consider requiring all employees who have positions involving managerial decision- making to complete an additional conflict of interest statement annually. The findings were also turned over to the local District Attorney.
NORTH CAROLINA DEPARTMENT OF TRANSPORTATION
Auditors received allegations through the State Auditor’s Hotline that the Assistant State Geotechnical Engineer misused funds paid to the Department of Transportation ( DOT) by the attendees, exhibitors, and sponsors of a conference hosted by DOT. Auditors identified eight instances totaling over $ 36,000 in which conference funds were disbursed in violation of departmental policy requiring approvals by the DOT Purchasing Officer. In addition, DOT spent over $ 1,200 in conference funds to purchase information technology items without the approval of DOT’s Purchasing or Information Technology divisions as required by policy. OSA recommended management take appropriate action for the Geotechnical Engineer’s failure to follow policy and reemphasize the importance of compliance with purchasing and information technology regulations.
North Carolina Office of the State Auditor 18 Increasing Efficiency... Exposing Fraud
NORTH CAROLINA SCHOOL OF SCIENCE
AND MATHEMATICS
Investigators received allegations through the
State Auditor’s Hotline regarding the finances for a
student exchange trip to Germany in February 2005.
Allegedly, the North Carolina School of Science and
Mathematics ( School of Science and Math) did not
fully refund surplus travel fees to the parents of
student participants.
Students participating
in the exchange trip
paid $ 1,500 in advance
to cover costs and
trip materials with
the indication that
any unspent money
would be refunded.
Investigators found the
total cost of the trip was
approximately $ 16,500
despite collections of
$ 30,500, and as a result,
School of Science and
Math administrators
should have refunded
19 students $ 707.56 and
one student $ 607.56.
However, the School only refunded $ 565 per student
and retained a balance of over $ 2,700 towards the
cost of future exchange trips. The investigation also
revealed the School of Science and Math did not
sufficiently disclose the trip’s finances or how the
surplus funds would be applied.
OSA recommended the School of Science
and Math notify parents that fees were retained
and provide each parent an opportunity to either
receive a refund or indicate their desire to make a
donation to the exchange program. In addition, the
administration should clearly disclose in future fee
schedules that a portion of fees may be applied to
program activities in subsequent years.
NORTH CAROLINA UTILITIES COMMISSION
PUBLIC STAFF
The Office of the
State Auditor received
a complaint alleging the
Information Technol-ogy
Director ( Director)
for the North Carolina
Utilities Commission
Public Staff used a state
computer and network
resources to teach col-lege
courses during the
normal work day. The
Director completed a
secondary employment
form that indicated he
only taught one class
at one local college.
However, auditors de-termined
the Director
taught courses at Peace College, Wake Technical
Community College, and Capella University during
the past two years. While the majority of the class
schedules took place during the evenings and week-ends,
some classes were scheduled during the day.
Auditors concluded the Director violated agency
policy by excluding two teaching positions which
prevented management from adequately assessing
the effect of the secondary employment.
Annual Report 2007 | Investigative Division
School of Science and
Math should have
refunded 19 students
$ 707.56 and one student
$ 607.56. However, the
school only refunded $ 565
per student and retained
a balance of over $ 2700
towards the cost of future
exchange trips.
Increasing Efficiency... Exposing Fraud 19
Analysis of computer files confirmed the Director
used state computer resources for his secondary
employment. An examination of his state- issued
computer revealed over 8,300 e- mails related to
secondary employment over a six- year period and
over 900 additional e- mails related to students and
staff at the educational institutions identified above.
These e- mails were generally sent during normal
work hours and included the Director’s contact
information at the Utilities
Commission Public Staff.
OSA recommended man-agement
take appropriate dis-ciplinary
action for the Direc-tor’s
failure to fully disclose
the extent of his secondary
employment and for violat-ing
the “ reasonable personal
use” provision of the agency’s
internet policy. In addition,
management should ensure
employees fully disclose sec-ondary
employment on an
annual basis and re- empha-size
the internet usage policy.
NORTH CAROLINA AGRICULTURAL AND
TECHNICAL STATE UNIVERSITY
Investigators received allegations through
the State Auditor’s Hotline that the Assistant
Vice Chancellor of Police and Public Safety at
North Carolina Agricultural and Technical State
University ( University) used a University cellular
phone for personal calls. An analysis of cell phone
records indicated the Assistant Vice Chancellor
accumulated over 2,400 minutes of airtime use for
calls of a personal nature. This misuse of the cell
phone violated University policy and resulted in
over $ 1,100 of wireless charges for personal calls.
OSA recommended the Assistant Vice Chancellor
reimburse the University for these calls and that
management re- emphasize the policy prohibiting
personal use of state- issued cell phones.
NORTH CAROLINA
DEPARTMENT OF
HEALTH AND HUMAN
SERVICES -- DIVISION OF
PUBLIC HEALTH
An allegation was received
through the State Auditor’s
Hotline concerning a conflict
of interest related to second-ary
employment within the
Physical Activity and Nutri-tion
Branch of the Division
of Public Health. Auditors
confirmed that management
created a business to provide
consulting services to groups
outside state government and North Carolina since
2001. However, management did not complete a
secondary employment form or receive manage-ment
approval as required by departmental policy.
OSA recommended that management submit a
secondary employment form for management ap-proval
and that Department of Health and Human
Services management reinforce the requirement to
employees including an annual update.
North Carolina Office of the State Auditor
Management should
ensure employees fully
disclose secondary
employment on an
annual basis and
re- emphasize the
internet usage policy.
20 Increasing Efficiency... Exposing Fraud
Management Services &
Nongovernmental Compliance Division
The Management Services and Nongovernmental Compliance Division ( MS& NGCD), has the responsibility of increasing oversight and accountability of State and Federal pass- through grants typically given to nonprofit organizations. The Division, formed in July 2005 in response to changes in grants reporting statutes, responds to the growing need for compliance oversight and training to adhere to changing reporting requirements.
The impetus for the creation of MS& NGCD was twofold. First, OSA needed to refocus its resources to increase training and “ best practices” for nonprofit organizations receiving State grants. Second, OSA needed to increase compliance and accountability of funds on the grantee and funding agency levels. The Division has set measurable goals for 2008 based on the accomplishments of the past two years.
OSA is proud to report that MS& NGCD continues to meet all areas of its original mission. The following is a summary of 2007 accomplishments, broken down by internal category:
Training
• Grants Training: During fiscal year 2007, the Division trained 4,535 participants in 72 training sessions, bringing the total number of participants trained since August 2005 to approximately 8,500. This training has continued to contribute to fewer grantees in noncompliance.
• Effective Grants Administration Certificate Program: Working with the Office of State Personnel, the Division established the Effective Grants Administration Certificate Program consisting of 5 core grants training courses that provide the basics for good oversight and accountability of grant funds. During fiscal year 2007, 63 grantee and agency personnel have earned this Certificate.
• Multifaceted Training: Other types of training included grants administration sessions directed at State agency personnel, grants reporting/ accountability sessions directed at grantees, special sessions conducted at the request of various groups ( e. g., DHHS and state level associations of various types) and presentations at 17 conferences during the fiscal year.
• Web- based Training Resources: The Division provided templates, reference materials and training tools to all participants online. Additionally, considerable work was done on setting up e- Learning opportunities for grants training. This work resulted in the first online e- Learning offering for the 2- hour Grants Administration Update posted on July 31, 2007.
Compliance
• Increased Grantee Compliance: Posting the monthly noncompliance list on OSA’s web page has served to inform legislators, State
Annual Report 2007 | Management Services & Nongovernmental Compliance Division Increasing Efficiency... Exposing Fraud 21
funding agencies, and the public of which grantees have not complied with the statutory reporting requirements. While the monthly noncompliance percentage varies, at June 30, 2007 the noncompliance rate had dropped to 18.5% reflecting the proper accounting of an additional $ 32 million.
• Increased Review of Grantees’ Annual Reports: During fiscal year 2007, OSA reviewed 61% more grantee annual reports due to changes in statutory regulations that affected 2006 annual reports filed in fiscal year 2007. As a result, the number of grants covered under OSA’s review increased to 4,786 from 2,969 in fiscal year 2006.
• Timely Processing of Grantee Reports: The Division has shortened the time it takes to process grantee reports from a 5- month backlog in 2005 to processing within approximately 3 days of receipt in 2007.
• Online Reporting Program: Working in conjunction with the Office of Information Technology Services, the Division is finalizing a new online reporting program for State agencies and grantees. This program, which is scheduled to be fully operationally by December 2007, will eliminate redundancy, increase data capture efficiency, and improve reporting timeliness.
Best Practices and Research Assistance
• Quarterly Best Practices newsletter: This newsletter updates grantees on state grant requirements, potential financial accountability problems and developing adequate internal policies and accounting controls. The Division published four quarterly issues during fiscal year 2007 which are posted on the OSA web page.
• Research and Reporting Assistance: The Division continues to provide assistance, via telephone or email, on unique, confusing and complicated questions related to grants reporting.
• Current Documents and Formats: The Division provides grantees and funding agencies information on required grant reporting documents and formats through developing, updating and maintaining online forms dictated by the reporting statute.
Agency and Grantee Examinations
• Grant Examinations: The Division began conducting agency and grantee examinations in June 2006. For Fiscal Year 2007, OSA has initiated 25 grant examinations ( 21 completed) that resulted in OSA recommending repayment of $ 419,000 in grant funds, equal to an average of $ 20,000 per examination.
• Examination Training Tools: The Division uses the examination process to educate agency personnel on monitoring techniques and to suggest improvement to those techniques. In addition, the examination provides an excellent opportunity to provide best practice information on improving accountability to grantees.
Special Projects
• Local Government Grants: The Division has worked closely with the Local Government Com­mission
at the state level to identify and capture data on grants flowing to local government units. The result is a summary report and grants data­base
that is posted on the OSA web page giving information about the approximately $ 12 billion in State and Federal grants at the local level. This report will be updated annually.
North Carolina Office of the State Auditor 22 Increasing Efficiency... Exposing Fraud
• Audit Findings Database: The Division updates and maintains an audit findings database to identify problem trends at State agencies. This database assists in internal audit planning and the identification of best practices to share with State agency and grantee personnel.
Going into 2008, the Division will focus on implementing the Grants Information Center ( GIC) online reporting system. This will entail conducting training sessions statewide for both funding agency and grantee personnel. Successful implementation of the GIC system will greatly increase the accuracy and timeliness of grants data to all interested parties while significantly decreasing the workload of the funding agencies and the Division. Furthermore, GIC will afford the grantees a much simpler method of complying with statutory reporting requirements.
Compliance reporting and subsequent pro­cessing
is an important benchmark in how effec­tive
MS& NGCD is at compliance and account­ability.
While OSA cannot control the number of reports it receives, it can control its efficiency in regard to bringing noncompliant grantees into compliance. The number of noncompliant grant­ees
ebbs and flows with reporting deadlines and, for fiscal year 2007, was significantly impacted by the statutory change in reporting requirements. That statutory change presented unexpected chal­lenges
to our 2007 goal of a 30% reduction in the number of noncompliant grants. The Division’s goal for 2008 is to continue efforts to reduce the number of noncompliant grants.
Coordinating and cooperating with the grantor agency is of primary importance to successfully monitor and review nonprofits and their grantor agencies. The Division posted 29 grant examinations and exceeded its goal of completing 24 examinations during fiscal year 2007. The goal for 2008 is to increase the number of new examinations from 29 completed in 2007 to 40 by the end of this fiscal year. In an effort to help train agency monitors to be proactive thinkers, the Division plans to conduct separate monitoring examinations of grantor agencies. For fiscal year 2007, these examinations were conducted in conjunction with the grant examination. The Division’s goal is to complete 12 separate agency monitoring examinations by the end of next fiscal year.
Training is an important function of MS& NGCD and the Division plans to continue its efforts in 2008 by offering both live and online grants training. Plans are to conduct a minimum of 6 live sessions per month, in addition to offering online courses in an e- Learning format. An important part of training is providing information to grantees and grantors that is relevant to their particular circumstances. To aid in this effort, the Division will continue to issue its Best Practices quarterly newsletter and identify other efforts to benefit both grantors and grantees. Best Practices is distributed to all 3,789 grantees identified in our grants database, as well as agency personnel involved with grants administration.
Annual Report 2007 | Management Services & Nongovernmental Compliance Division Increasing Efficiency... Exposing Fraud 23
O SA’s Performance Audit Division is
designed to allow for flexible deploy-ment
of resources while upholding
strict auditing standards. Unlike prescheduled fi-nancial
audits, the subjects of performance audits
are chosen at the discretion
of the State Auditor upon
consideration of two fac-tors:
greatest risk potential
and greatest opportunity
for impact. Upon release,
performance audits provide
the public, agency manag-ers
and program managers
with an objective analysis
of whether State agencies
efficiently and effectively
manage their programs
and activities. Furthermore,
these audits are of particu-lar
value to legislators who
must consider the effectiveness of State programs
in funding decisions and to the taxpayers who pay
for those programs.
OSA’s efforts in the Performance Audit Division
during 2007 revolved around retooling its work to
produce reports that are narrower in scope and
target specific programs or areas where the State
is at greatest risk. Training for the Division’s au-ditors
and staff focused on performance measure-ment
and business process improvement. Weekly
training sessions instructed auditors how to iden-tify
opportunities to make government operate
more efficiently, how to evaluate the relationship
between program results and the resources used
to achieve those results, and how to develop mea-surement
based audit objectives. The continued
reengineering of the Performance Audit Division
will result in value- added audits that focus on pro-active
issues and strengthen
the State Auditor’s watch-dog
function in State gov-ernment.
The following are sum-maries
of the Performance
Audit Division’s audit re-ports:
State Children’s Health
Insurance Program
( SCHIP)
The audit objective was
to determine if the State
could realize cost savings
by moving SCHIP claims
processing from the State Health Plan to the
Division of Medical Assistance.
The audit found that the State could realize
nearly $ 16,000,000 in annual savings and have
access to $ 3,500,000 currently held in reserve at the
State Health Plan by moving the responsibility for
SCHIP medical claims processing from the State
Health Plan to the Division of Medical Assistance.
Based on the SCHIP medical payments budgeted
for the 2008 fiscal year, almost 10,000 additional
children could be enrolled in the program and
receive medical coverage using the recurring
administrative savings and additional rebates.
North Carolina Office of the State Auditor
Performance Audit Division
The continued
reengineering of the
Performance Audit
Division will result in
value- added audits that
focus on proactive issue
and strengthen the State
Auditor’s watchdog
function in State
government.
24 Increasing Efficiency... Exposing Fraud
New Vistas – Mountain Laurel Inc, Mental
Health Service Provider
As a result of a request by several members
of the North Carolina General Assembly and
local leaders, the State Auditor conducted a
performance audit on New Vistas – Mountain
Laurel, Inc. ( NVML). The audit’s main objective
was to determine the causes for the demise of this
local mental health service provider.
The audit found that while systemic issues within
mental health reform contrib-uted
to the closing of NVML,
the organization encountered
significant business challenges
that severely compromised its
ability to succeed. Contribut-ing
factors included: problems
originating from NVML’s cre-ation
as a spin- off organiza-tion
from the Blue Ridge Area
Authority; financial instabil-ity
due to inadequate capital
resources, cash flows, and in-formation
and financial man-agement
systems; and staffing
deficiencies.
The audit also identified several key statewide
issues which were presented as issues for further
study. They include:
• The need to define the roles of key players in the
mental health reform efforts, particularly at the
state and county levels.
• The sufficiency of the current private provider
format to ensure that adequate services are avail-able
and provided in all areas as needed.
• The immediate need for crisis centers to address
current needs and the potential increase due to
the planned phase- out of State- based facilities.
Indigent Defense Services
The audit objectives were to determine if the
Office of Indigent Defense Services’ policies and
procedures provide reasonable assurance that
independent and competent legal services are
provided to indigent defendants, determine if
payments for legal services are made accurately
and efficiently, and make
recommendations regarding
process improvements.
The audit found that attor-neys
representing indigent de-fendants
were not sufficiently
independent of judicial influ-ence
because judges performed
managerial functions, such as
appointing Public Defend-ers
to office, assigning cases
to attorneys, establishing at-torney
rosters, and approving
attorney fee payment applica-tions.
In addition, the Office
of Indigent Defense Services’
policies and procedures did not adequately ensure
that competent legal representation was provided
for indigent defendants because statewide criteria
were not used to select qualified attorneys, attor-ney
performance was not systematically evaluated,
and standard procedures were not established to
monitor and resolve client complaints.
The audit also found that attorney fee pay-ment
procedures were inefficient and inadequate
to prevent duplicate payments, overcharges, or
Annual Report 2007 | Performance Audit Division
This mental health
audit also identified
several key statewide
issues which were
presented as issues for
further study.
25 Increasing Efficiency... Exposing Fraud
unauthorized payments. Procedural weaknesses included failure to verify case numbers on fee ap­plications,
lack of detailed time sheets to support charges, attorneys with multiple vendor numbers, and inadequate segregation of duties.
The report also stated that the Office of Indigent Defense Services lacked adequate resources to properly address many of the issues identified during the audit.
Office Supplies Term Contract Administered by the Purchase and Contract ( P& C) Division of the Department of Administration
The objective of this performance audit was to determine whether P& C was effectively monitoring vendor performance of the statewide term contract for office supplies. We performed tests to determine if quoted catalog prices, as well as actual prices charged to State agencies, agreed with contract prices. In addition, we tested to determine if items offered under the contract were available for purchase.
The audit found that P& C was aware of pricing errors and product availability issues, but had not taken steps to identify the underlying causes of the problems and subsequently require permanent, corrective action from the vendor ( Office Depot). In addition to identifying $ 40,887 in vendor overcharges to State agencies, the audit concluded that the absence of permanent, corrective action compromised State agencies’ assurance that contracted items would be readily available for purchase at contracted prices.
Economic Development Studies
The audit objective was to assess the implementation status of several significant recommendations addressed in consultants’ studies. These consultants were hired by the State or related organizations to assess the operations of North Carolina’s economic development system. The studies presented similar findings, although they were performed at different times by different consultants.
The audit found that the Department of Commerce does not function as the lead agency for economic development activities for the State. Instead, the regional commissions and partnerships set their marketing agendas independently from the Department. Also, North Carolina’s economic development objectives, roles, and vision are not clear to many in the economic development community. A statewide marketing plan inclusive of all the economic development system had not been developed.
The audit also found that the Governor plays a key role in determining the economic plan for North Carolina. Results from surveys of North Carolina’s economic development participants suggested that the Governor’s visibility and leadership could be enhanced by more involvement with the local economic development community.
Finally, the audit found that monitoring of the regional partnerships by the Department was limited. Monitoring efforts did not focus on comparing actual accomplishments to specific goals and performance measures for the partnerships.
North Carolina Office of the State Auditor 26 Increasing Efficiency... Exposing Fraud
Enterprise Project Management Office
( EPMO)
The objectives of this assessment were to
determine the design and implementation of the
recently created Enterprise Project Management
Office, and determine if the policies, procedures
and methodologies employed significantly
improved the likelihood that agency information
technology ( IT) implementation projects
would be successful. This
assessment was performed
under contract with the IT
management firm of Berry,
Dunn, McNeil, & Parker.
The team concluded that
the EPMO has improved the
likelihood that state agency
IT projects are completed
on time, within budget,
and with the required
functionality as compared to
the pre- EPMO environment
( i. e., prior to January 2005).
The team also identified
several findings and
recommendations in six key
topical areas. These findings and recommendations
provide best practice insight and opportunities for
improved services for the still maturing office.
Internal Auditing In North Carolina
Agencies and Institutions ( Update)
The prior year performance audit found that
the State’s internal audit function is inadequately
staffed and is in need of more direct guidance
from the General Assembly. Furthermore, no
universal State criteria or minimum standards
existed regarding internal audit effort, authority or
responsibilities.
Based on the findings
and recommendations
from this audit, the General
Assembly initiated a further
study of the internal audit
efforts within the State and
later enacted the North
Carolina Internal Audit
Act. Legislation now
requires agencies with an
annual operating budget
of $ 10 million in operating
revenue, agencies with
more than 100 employees,
or agencies that receive
and process more than $ 10
million in cash in a fiscal
year to have an internal audit effort. The act also
sets requirements for the types of audit work to
be performed, professional auditing standards to
be followed, minimum qualifications of internal
audit staff, and a direct reporting relationship to
the agency head.
Annual Report 2007 | Performance Audit Division
The NC General
Assembly enacted the
North Carolina Internal
Auditing Act based on a
2006 Performance Audit
on internal auditors in
State agencies.
27 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
Information Systems Audit
Division
The Information Systems Audit Division’s responsibilities include analyzing State agency computer systems to ensure that they are properly secured, produce accurate financial reports and comply with State regulations. Staff in this division conduct their own audits of computer systems across the State. In addition, they provide IS audit assistance to financial audit teams to ensure that agency computerized accounting systems can be relied upon to produce accurate financial reports. Without those assurances, financial audit teams would be unable to issue unqualified opinions on the accuracy of agency financial statements.
IS Audit Division auditors are in a unique position to think proactively about discovering suspicious data trends flowing from an agency’s information systems. OSA’s goal for 2006 was to integrate IS auditors into Financial and Investigative audit teams and to increase proactive auditing by providing computer forensic assistance and data mining analyses of agency financial data.
To accomplish this goal, OSA developed a new tool called Strategic Reviews that are issued separately from IS audits. These reviews are used to uncover fraud, waste or abuse of taxpayer resources by following suspicious State agency data trends. While initiated and coordinated by the IS Audit Division, these reviews involve auditors from all divisions of the OSA.
Strategic Reviews build a bridge from an abstract proactive policy to the actual practice of being proactive. By conducting Strategic Reviews through the use of data mining analysis, OSA is in the forefront of auditing trends. To improve innovation and effectiveness, OSA hosted an on site visit of a leading expert in data mining from Brigham Young University. Fueled by resources from AuditWatch efficiency gains, OSA plans to increase the number of Strategic Reviews to bring more accountability to State government.
The OSA’s emphasis for the future is to weave more IS Audit Division auditors into other auditing processes to instill a team- centered approach. Together, the team can more readily identify security risks or suspicious data trends. The General Assembly has approved OSA’s request to hire 6 additional auditors over two years to facilitate the team- centered approach to auditing.
The following is a summary of IS Audit Division’s reports and reviews conducted during 2006- 2007:
Strategic Review: North Carolina Division of Motor Vehicles
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the North Carolina Division of Motor Vehicles’ driver’s license database. This review found 14,122 invalid SSNs. In addition, the review found 12,796 SSNs that belonged to deceased persons on the Social Security Administration’s Death File.
Strategic Review: North Carolina Department of the Treasurer
OSA received a tip that 10 local government retiree beneficiaries had been overpaid. OSA initiated a strategic review to determine the magnitude of the overpayment. OSA selected a sample of Law Enforcement Officer Retirees within the Local Government Retirement System ( LGRS), and a statistical sample of retirees from the entire LGRS population. Our review noted that the 10 retiree beneficiaries were overpaid by $ 1,372,219.32. From our samples of other retirees in the LGRS, we did not find any additional overpayments. 28 Increasing Efficiency... Exposing Fraud
Strategic Review: NC Department of Justice
The purpose of this Strategic Review was to identify invalid social security numbers in the payroll system at the North Carolina Department of Justice and to investigate unusual payments noted on the Department’s payroll. This review found that one retired employee continued to receive a special separation law allowance for 20 months after this employee’s death.
Strategic Review: NC State University
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the payroll system at North Carolina State University and to investigate unusual payments noted on the University payroll. This review found that 8 University employees had SSNs that matched the SSNs of deceased persons. Seven of these employees’ numbers were keypunch errors. The other employee was using a SSN that belonged to a deceased person. In addition, one University employee did not have an I- 9 form on file.
Strategic Review: UNC Hospitals
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the payroll system at UNC Hospitals. This review found that UNC Hospitals failed to perform a quarterly verification of SSNs for their employees. In addition, this review found employees who were using SSNs assigned to other people ( deceased and living).
Strategic Review: UNC- Chapel Hill
The purpose of this Strategic Review was to identify invalid social security numbers ( SSNs) in the payroll system at UNC Chapel Hill. This review found one employee whose SSN matched the SSN of a deceased person on the Social Security Administration’s Death File.
IS Audit: Beaufort Community College – General Controls Review
OSA conducted an Information System audit of Beaufort Community College ( BCC). The primary objective of this audit was to evaluate IS general controls at BCC. The scope included general security, access controls, systems software, physical security, and disaster recovery. OSA found weaknesses in access controls and recommended improvements to management in a private letter. The detailed results of the assessments are kept confidential as to not announce control weaknesses to would- be intruders.
IS Audit: Fayetteville State University – General Controls Review
OSA staff audited Fayetteville State University with the primary objective to evaluate general controls. The audit’s scope included general security, access controls, program maintenance, systems software, systems development, physical security, and disaster recovery. OSA found several weaknesses in access controls.
IS Audit: UNC Pembroke – General Controls Review
OSA conducted a general controls audit at UNC Pembroke ( UNCP). The scope of the audit included general security, access controls, program maintenance, systems software, systems development, physical security, and disaster recovery. OSA found that UNC Pembroke’s security policies were in draft format, a security baseline had not been developed and UNCP had not performed a risk assessment. In addition, OSA found several weaknesses in access controls.
Information Security Vulnerability Assess­ments
– NC Department of Transportation
The purpose of this assessment was to gauge NC DOT’s security posture at any given point in time, identify security risks that might make an entity vulnerable to attack, and determine appropriate procedures to mitigate the identified risks. The detailed results of the assessments are kept confidential as to not announce control weaknesses to would- be intruders. General results containing the numbers of high, medium and low weaknesses are released to the public through OSA’s website and electronic posting service.
Annual Report 2007 | Information Systems Audit Division 29 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
Staff in the Financial Audit Division audit state agencies, universities, community colleges, clerks of superior court, and Smart Start nonprofit organizations. The State Auditor is required to perform these audits as part of statutory responsibilities or to comply with federal requirements. Some audits are performed at the State Auditor’s discretion to ensure that all agencies are properly reporting their financial conditions.
The Office of the State Auditor spent the greatest percentage of hours ( 49%) to perform annual financial statement audits/ reviews of the State’s sixteen universities and fifty- eight community colleges. One of its largest financial audits is the state’s Comprehensive Annual Financial Report ( CAFR), which accounted for 13% of staff hours. The CAFR contains the annual financial statements for the state of North Carolina as a whole.
Another major financial audit project, accounting for 29% of staff time, is the state’s Single Audit Report. The Single Audit Report contains the results of the audit of the state’s financial statements and the audit of the state’s compliance with laws and regulations pertaining to federal grant programs. The office periodically audits selected fiscal controls of clerks of superior court and general government agencies.
The audit staff conducts financial and compliance audits of the organizations participating in the Smart Start program, including the statewide coordinating agency ( the North Carolina Partnership for Children, Inc.) and the individual local partnerships. Smart Start is an early childhood development program designed to prepare children to begin school healthy and ready to succeed. Currently, 79 Smart Start partnerships operate throughout the state.
Financial Audit Results Summary
For the thirteenth consecutive year, the State Auditor issued an unqualified opinion on the State’s financial statements. This opinion, for the fiscal year ended June 30, 2006, was contained in the CAFR prepared by the Office of the State Controller.
The State of North Carolina also received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association for the thirteenth consecutive year. This award is given to government units whose CAFR achieves the highest standards in government accounting and financial reporting.
In conjunction with the audit of the State’s finan­cial
statements, the State Auditor issues a report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements in the Single Audit Report. Six findings of non- compliance and weaknesses in in­ternal
control related to the financial statement au­dit
were reported. These findings disclosed internal control deficiencies related to separation of duties, bank reconciliations, year- end financial reporting, Medicaid cost settlements, Medicaid claims pay­ments,
and processing of student financial aid ap­plications.
With regard to compliance with federal program requirements, the State Auditor issued a qualified opinion on certain federal programs due to mate­rial
noncompliance with certain requirements. In
Financial Audit Division 30 Increasing Efficiency... Exposing Fraud
total, auditors identified questioned costs resulting from 89 identified audit findings.
In addition to reporting on the CAFR and Single Audit at the statewide level, OSA publishes in separately issued reports the audit findings and recommendations from CAFR and Single Audit work for each individual government agency.
Reported findings from university and community college audits for fiscal year 2006 primarily related to four areas: access rights, financial statement preparation, management oversight and internal control weaknesses. These internal control weaknesses were in areas such as financial aid awards, cash receipts and deposits, cash disbursements and separation of duties.
In the Clerk of Superior Court audits performed in fiscal 2007, OSA noted internal control weaknesses. These internal control weaknesses were in areas such as cash receipts and disbursements, segregation of duties and timely deposits. To better direct our limited staff resources, we have set a target of auditing each Clerk of Superior Court every three years.
Smart Start findings issued during 2005- 2006 focused on internal control weaknesses, contract management and monitoring, and competitive bidding. Audit reports issued during the year ended June 30, 2007 are listed in appendix A. This included a total of 9 audit reports for the fiscal year ended June 30, 2005, issued subsequent to June 30, 2006.
For the fiscal year ended June 30, 2006, the Office of the State Auditor performed 41 audits of Smart Start partnerships. CPA firms performed 25 of these audits, with OSA staff performing the remaining 16 audits. All but one report were issued by June 30, 2007.
OSA’s goal is to complete and release all 45 Smart Start audits for the 2006- 07 fiscal year by April 30, 2008. It is anticipated the more timely release of the audit reports will allow the North Carolina Partnership for Children and the local partnerships to more quickly address identified deficiencies and to make the necessary improvements to ensure accountability of state funds.
Annual Report 2007 | Financial Audit Division
Officefficefficefficeffice ofof thethethe statestatestatestate auditorauditorauditorauditorauditorauditorauditor mainmainmainmain officeofficeofficeofficeofficeoffice andandand branchbranchbranchbranchbranchbranch locationslocationslocationslocationslocationslocationslocationslocationslocations
Morganton
AshevilleCharlotteFayettevilleWilmingtonGreenvilleEdentonRaleighGreensboroWinston- Salem 3 Increasing Efficiency... Exposing Fraud 1
North Carolina Office of the State Auditor
Personnel
To be a proactive State agency, OSA must be a responsible manager of its personnel. After selecting the best qualified applicants, OSA must then provide quality training to employees and a quality control review of employees work product.
Recruiting
OSA’s goal is to build relationships with the right applicants. This will reduce turnover and eliminate the waste that frequent turnover creates.
OSA continues its efforts to hire talented, skilled staff by recruiting on university campuses across the state. We continue to work with campus faculty to participate in faculty/ student meetings, accounting classes and other events. Significant effort is made to identify applicants who want to be challenged and provide a service to the public.
In addition, OSA has made great strides in its internship program. Internships provide individuals an opportunity to perform meaningful, career- related work with our office prior to their final year in school. If that is successful, the applicants will be invited to begin their career with OSA. This program has enabled OSA to hire very talented individuals who are looking for a long- term relationship with our office.
Training
OSA continues to work towards the goal of more effective and efficient audits. These efficiency gains allow OSA to utilize its resources to do more with the current auditors and staff positions. Training for OSA audit staff in 2007 included eLearning and a followup to the 2006 AuditWatch curriculum. Efficiency levels were analyzed and AuditWatch provided OSA with feedback in areas that needed improvement. AuditWatch also provided OSA with training in using analytics as another tool for more effective audits.
Skills needed by OSA staff include the ability to assess the risk of fraud in an audit and how to respond to those risks. In May 2007, OSA provided training to its entire staff on fraud detection and interviewing skills designed to aid in the detection of fraud.
Technical skills are not all that is needed for OSA staff to accomplish the goals and objectives of the office. OSA managers and supervisors need skills to manage their teams and maximize their team’s productivity. Spectrum Development provided training to OSA mangers and supervisors to aid them in training, retaining and managing their audit staff.
Quality Controls
OSA’s work product is governed by strict adher­ence
to professional standards promulgated by gov­ernment
agencies and professional organizations including the Governmental Accounting Standards Board, the Financial Accounting Standards Board, the Federal Office of Management and Budget, the Government Accountability Office, the American Institute of Certified Public Accountants, and vari­ous
state and federal laws and regulations. These standards require that auditors remain indepen­dent,
be technically proficient and receive continu­ing
professional education, obtain sufficient appro­General
Administration 32 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | General Administration
priate evidence to support conclusions, and issue reports that clearly communicate audit results.
OSA has a control system to ensure the quality of audit work. The system includes an experienced senior auditor in a Quality Control position, supervisory review of all work product, and management review of audit reports and critical supporting workpapers to ensure that OSA delivers audits and reports with efficiency, expertise and consistency. OSA monitors the effectiveness of its quality control system by having staff who did not participate in an audit periodically review the work. To uphold the standards of the supervisory review, OSA’s goal is that all newly hired Supervisor level employees and above in the financial audit division have a valid CPA license, or the merit- based equivalent in work experience.
Another layer of OSA review exists. The Agency receives a peer review every three years under the direction of the National State Auditors Association. During the peer review, members of audit staffs from other states review the office’s quality control system and workpapers for compliance with auditing standards. The most recent peer review was performed in July 2006 and resulted in a clean opinion on the quality control system.
Processing & Publication
With over 190 OSA employees, the publishing of audits, reports and reviews is a complicated and time consuming process. Magnified by the sensitive nature of the audit subject matter, OSA’s administrative staff must be detail minded and highly organized. The goals of accuracy and timeliness are the staff’s top priorities. However without effective publication, the audit, report or review would go unnoticed.
Publication of the audits, reports and reviews is an essential part of OSA’s proactive posture. A report exposing an instance of fraud, waste or abuse of taxpayers’ resources, if publicized by the statewide news media, becomes an effective tool for the deterrence of future fraud, waste or abuse of taxpayers’ resources. OSA, through a positive relationship with the news media, can proactively deter others from committing similar acts of fraud, waste and abuse of taxpayer money.
Budgeting & Purchasing
OSA is the taxpayers’ watchdog against wasteful spending of State resources. To be an effective messenger, OSA must ensure that its resources are spent as wisely as possible.
OSA’s appropriated budget is approximately $ 16.6 million and the agency bills approximately $ 3.6 million for federal audit work. In addition to the central office in Raleigh, OSA has 9 branch offices throughout the State which our budget office is responsible for managing financially.
Budgeting and purchasing are governed by strict rules and regulations. An independent CPA firm annually conducts a financial audit of the office and routinely issues a clean opinion of its financial statements.
Management Information Systems ( MIS)
The MIS Division of the Office of the State Auditor is charged with four primary objectives:
• Provide Information Technology services including Operational Support, Application Development, Infrastructure Management and Information Security to Agency Personnel
• Oversight of Senate Bill 991 compliance 33 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
• Enterprise Information Technology strategic planning for the Agency
• Information Technology tactical implementation in order to increase productivity, efficiency and security of critical business functions.
In addition to providing for the daily operational support for Agency personnel, MIS completed a number of major projects to enhance the efficiency, quality of service, and security of the Agency.
MIS worked closely with the Office of the State Controller to ensure the Agency met all technical requirements for the Beacon Project ( statewide payroll application slated for implementation in 2008). MIS also worked with ITS and the Enterprise Data Warehouse service ( as the first customer of the new Statewide Enterprise level service) to complete the Management Services and Nongovernmental Compliance Division’s Grants Compliance online application, which will greatly enhance the operational capabilities of that Division. MIS has completed an internal upgrade of the Agency Intranet, completing a change over from a dynamic site to an industry standard portal technology designed to encourage collaboration among personnel and to enable a more efficient workflow during audits. In conjunction with the portal upgrade, MIS piloted an e- Learning initiative to make training more efficient and cost effective.
In addition, MIS has upgraded the Agencies network infrastructure to meet ESAP requirements and has tested and implemented a new network Intrusion Prevention System ( IPS) to ensure the security of sensitive Agency information. The Agency servers have been upgraded to latest versions and the capacity has doubled. Finally, a single comprehensive Business Continuity Plan ( BCP) / Continuation of Operations Plan ( COOP) was developed and tested to meet the State requirements of both documents and to address Pandemic Influenza planning requirements. Also, MIS is working closely with ITS to securely merge the OSA network infrastructure into the State of North Carolina’s architecture.
In 2008, the MIS Division will continue to provide quality operational support to Agency personnel. In addition, the MIS Division will aggressively work to provide technologies to Agency personnel that will improve the efficiency and quality of Agency critical business functions. The statewide payroll system, Beacon, will be implemented in March 2008. In the first quarter of 2008 the Management Services and Nongovernmental Compliance Division application will be made available to all customers and all Agency personnel will complete comprehensive training on the new internal portal. The e- Learning system will be expanded by incorporating an advanced Learning Management System solution. This will lead to expanded education and training opportunities including the ability to make vital information available via web casting. In addition, an Agency wide e- Recruiting solution will be designed and implemented to assist in the recruitment and hiring of quality candidates for open Agency positions. Finally, infrastructure and security needs will continue to be assessed and improved where feasible. 34 Increasing Efficiency... Exposing Fraud
Appendix A
The following reports are listed in reverse chronological order by audit type and were issued from July 1, 2006 through the date of this annual report:
Annual Report 2007 | Appendix A
Report Number Report Title Release Date
FCA- 2007- 2109 Brunswick County Clerk of Superior Court - Fiscal Control Audit 9/ 26/ 2007
FCA- 2007- 2178 Rockingham County Clerk of Superior Court - Fiscal Control Audit 9/ 25/ 2007
FCA- 2007- 2157 Martin County Clerk of Superior Court - Fiscal Control Audit 9/ 12/ 2007
FCA- 2007- 2127 Dare County Clerk of Superior Court - Fiscal Control Audit 7/ 10/ 2007
FCA- 2007- 2137 Graham County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 2007
FCA- 2007- 2174 Polk County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 2007
FCA- 2007- 6094 The North Carolina School of Science and Mathematics - Fiscal Control Audit 6/ 29/ 2007
FCA- 2007- 2196 Wilkes County Clerk of Superior Court - Fiscal Control Audit 6/ 28/ 2007
FCA- 2007- 2160 Mitchell County Clerk of Superior Court - Fiscal Control Audit 6/ 28/ 2007
FCA- 2007- 2121 Clay County Clerk of Superior Court - Fiscal Control Audit 6/ 25/ 2007
FCA- 2007- 2143 Haywood County Clerk of Superior Court - Fiscal Control Audit 6/ 21/ 2007
FCA- 2007- 2179 Rowan County Clerk of Superior Court - Fiscal Control Audit 6/ 14/ 2007
FCA- 2007- 2175 Randolph County Clerk of Superior Court - Fiscal Control Audit 6/ 11/ 2007
FCA- 2007- 2104 Ashe County Clerk of Superior Court - Fiscal Control Audit 6/ 11/ 2007
FCA- 2007- 2135 Gaston County Clerk of Superior Court - Fiscal Control Audit 5/ 30/ 2007
FCA- 2007- 2134 Franklin County Clerk of Superior Court - Fiscal Control Audit 5/ 23/ 2007
FCA- 2007- 2172 Person County Clerk of Superior Court - Fiscal Control Audit 5/ 17/ 2007
FCA- 2007- 2163 Nash County Clerk of Superior Court - Fiscal Control Audit 4/ 27/ 2007
FCA- 2007- 2131 Durham County Clerk of Superior Court - Fiscal Control Audit 4/ 27/ 2007
FCA- 2006- 2158 McDowell County Clerk of Superior Court - Fiscal Control Audit 4/ 16/ 2007
FCA- 2007- 2167 Orange County Clerk of Superior Court - Fiscal Control Audit 4/ 12/ 2007
FCA- 2006- 3400 Treasurer, Department of the State - Fiscal Control Audit 1/ 30/ 2007
FCA- 2006- 6800 Community Colleges, Department of - Fiscal Control Audit 1/ 26/ 2007
FCA- 2006- 4160 Controller, Office of the State - Fiscal Control Audit 9/ 14/ 2006
FIN- 2006- 6086 Elizabeth City State University - Financial Statement Audit 9/ 14/ 2007
FIN- 2006- 6070 North Carolina Agricultural and Technical State University - Financial Statement Audit 8/ 23/ 2007
FIN- 2006- 6090 North Carolina Central University - Financial Statement Audit 8/ 17/ 2007
FIN- 2006- 6807 Brunswick Community College - Financial Statement Audit 8/ 7/ 2007
FIN- 2006- 6878 Sandhills Community College - Financial Statement Audit 8/ 7/ 2007
FIN- 2006- 6822 College of the Albemarle - Financial Statement Audit 7/ 27/ 2007
FIN- 2006- 6876 Sampson Community College - Financial Statement Audit 7/ 12/ 2007
FIN- 2006- 6808 Caldwell Community College and Technical Institute - Financial Statement Audit 6/ 29/ 2007
FIN- 2006- 6818 Central Piedmont Community College - Financial Statement Audit 6/ 29/ 2007
FIN- 2006- 6843 Blue Ridge Community College - Financial Statement Audit 6/ 29/ 2007
FIN- 2006- 6834 Forsyth Technical Community College - Financial Statement Audit 6/ 27/ 2007
FIN- 2006- 4205 North Carolina Turnpike Authority - Financial Statement Audit 6/ 27/ 2007 35 Increasing Efficiency... Exposing Fraud
FIN- 2006- 6844 Isothermal Community College - Financial Statement Audit 6/ 26/ 2007
FIN- 2006- 6862 Pitt Community College - Financial Statement Audit 6/ 26/ 2007
FIN- 2006- 6854 Montgomery Community College - Financial Statement Audit 6/ 25/ 2007
FIN- 2006- 8560 Wireless Emergency Telephone System Fund - Financial Statement Audit 6/ 25/ 2007
FIN- 2006- 6880 Southeastern Community College - Financial Statement Audit 6/ 22/ 2007
FIN- 2006- 6886 Alamance Community College - Financial Statement Audit 6/ 22/ 2007
FIN- 2006- 6806 Bladen Community College - Financial Statement Audit 6/ 22/ 2007
FIN- 2006- 6870 Robeson Community College - Financial Statement Audit 6/ 11/ 2007
FIN- 2006- 6850 Martin Community College - Financial Statement Audit 6/ 6/ 2007
FIN- 2006- 6892 Wayne Community College - Financial Statement Audit 5/ 31/ 2007
FIN- 2006- 6824 Craven Community College - Financial Statement Audit 5/ 30/ 2007
FIN- 2006- 6828 Durham Technical Community College - Financial Statement Audit 5/ 29/ 2007
FIN- 2006- 8550 NC Agricultural Financial Authority - Financial Statement Audit 5/ 29/ 2007
FIN- 2006- 6888 Tri- County Community College - Financial Statement Audit 5/ 23/ 2007
FIN- 2007- 8303 USS North Carolina Battleship Commission - Financial Statement Audit 5/ 23/ 2007
FIN- 2006- 6853 Mitchell Community College - Financial Statement Audit 5/ 22/ 2007
FIN- 2006- 6872 Rockingham Community College - Financial Statement Audit 5/ 17/ 2007
FIN- 2006- 4407 Town of Butner - Financial Statement Audit 5/ 17/ 2007
FIN- 2006- 4620 North Carolina State Ports Authority - Financial Statement Audit 5/ 17/ 2007
FIN- 2006- 6848 Lenoir Community College 5/ 8/ 2007
FIN- 2006- 6856 Nash Community College 4/ 23/ 2007
FIN- 2006- 6864 Randolph Community College 4/ 23/ 2007
FIN- 2006- 6826 Davidson County Community College 4/ 16/ 2007
FIN- 2006- 6894 Western Piedmont Community College 4/ 16/ 2007
FIN- 2006- 8730 Statewide Single Audit 4/ 13/ 2007
FIN- 2006- 8530 North Carolina Global Transpark Authority 4/ 12/ 2007
FIN- 2006- 6055 UNC - Asheville 4/ 12/ 2007
FIN- 2006- 4900 Crime Control and Public Safety, Department of 4/ 5/ 2007
FIN- 2006- 4600 Commerce, Department of 4/ 5/ 2007
FIN- 2006- 3510a Treasurer, Department of the State 4/ 5/ 2007
FIN- 2006- 4410 Health and Human Services - CAFR and Single Audit 4/ 4/ 2007
FIN- 2006- 6889 Vance- Granville Community College 4/ 4/ 2007
FIN- 2006- 8025 NC State Board of Elections 3/ 26/ 2007
FIN- 2006- 8410 Auditor, Office of the State 3/ 26/ 2007
FIN- 2006- 6060 UNC - Wilmington 3/ 22/ 2007
FIN- 2006- 6020 UNC - Chapel Hill 3/ 19/ 2007
FIN- 2006- 6092 NC School of the Arts 3/ 17/ 2007
FIN- 2006- 4350 Wildlife Resources Commission 3/ 16/ 2007
FIN- 2006- 4650 Employment Security Commission 3/ 16/ 2007
FIN- 2006- 6868 Roanoke- Chowan Community College 3/ 16/ 2007
FIN- 2006- 3700 Agriculture and Consumer Services, Department of 3/ 15/ 2007
FIN- 2006- 6040 UNC - Greensboro 3/ 15/ 2007
North Carolina Office of the State Auditor 36 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Appendix A
FIN- 2006- 6065 East Carolina University 3/ 15/ 2007
FIN- 2006- 4300 Environment and Natural Resources, Department of 3/ 13/ 2007
FIN- 2006- 4660 Information Technology Services 3/ 9/ 2007
FIN- 2006- 6800 Community Colleges, Department of 3/ 9/ 2007
FIN- 2005- 6090 North Carolina Central University 3/ 9/ 2007
FIN- 2006- 4200 Transportation, Department of 3/ 7/ 2007
FIN- 2006- 6858 Coastal Carolina Community College 3/ 2/ 2007
FIN- 2006- 6816 Central Carolina Community College 2/ 26/ 2007
FIN- 2006- 6050 UNC - Charlotte 2/ 14/ 2007
FIN- 2006- 6095 UNC Hospitals - NC Memorial Hospital 2/ 2/ 2007
FIN- 2006- 6082 UNC - Pembroke 1/ 30/ 2007
FIN- 2006- 2103 Anson County Clerk of Superior Court 1/ 29/ 2007
FIN- 2006- 4160 Controller, Office of the State 1/ 24/ 2007
FIN- 2006- 6080 Appalachian State University 1/ 16/ 2007
FIN- 2006- 3400 Treasurer, Department of the State 1/ 12/ 2007
FIN- 2006- 6084 Winston- Salem State University 1/ 10/ 2007
FIN- 2006- 6030 North Carolina State University 1/ 4/ 2007
FIN- 2006- 4700 Revenue, Department of 12/ 27/ 2006
FIN- 2006- 6075 Western Carolina University 12/ 20/ 2006
FIN- 2006- 4670 NC Education Lottery 12/ 19/ 2006
FIN- 2005- 8550 NC Agricultural Finance Authority 12/ 7/ 2006
FIN- 2006- 4800 Cultural Resources, Department of 11/ 22/ 2006
FIN- 2005- 6806 Bladen Community College 11/ 17/ 2006
FIN- 2006- 2197 Wilson County Clerk of Superior Court 11/ 16/ 2006
FIN- 2006- 2145 Hertford County Clerk of Superior Court 11/ 16/ 2006
FIN- 2006- 3000 Governor, Office of the 10/ 31/ 2006
FIN- 2006- 8303 USS NC Battleship Commission 10/ 30/ 2006
FIN- 2006- 2139 Greene County Clerk of Superior Court 10/ 23/ 2006
FIN- 2006- 2188 Tyrrell County Clerk of Superior Court 10/ 13/ 2006
FIN- 2007- 2115 Carteret County Clerk of Superior Court 10/ 13/ 2006
FIN- 2006- 2133 Forsyth County Clerk of Superior Court 10/ 10/ 2006
FIN- 2006- 2150 Johnston County Clerk of Superior Court 10/ 2/ 2006
FIN- 2006- 2185 Surry County Clerk of Superior Court 10/ 2/ 2006
FIN- 2006- 2166 Onslow County Clerk of Superior Court 9/ 28/ 2006
FIN- 2005- 6850 Martin Community College 9/ 27/ 2006
FIN- 2006- 2112 Cabarrus County Clerk of Superior Court 9/ 13/ 2006
FIN- 2006- 2108 Bladen County Clerk of Superior Court 9/ 11/ 2006
FIN- 2006- 2170 Pender County Clerk of Superior Court 9/ 11/ 2006
FIN- 2006- 2173 Pitt County Clerk of Superior Court 9/ 11/ 2006
FIN- 2006- 2177 Robeson County Clerk of Superior Court 8/ 29/ 2006
FIN- 2006- 2184 Stokes County Clerk of Superior Court 8/ 29/ 2006 37 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
FIN- 2006- 2107 Bertie County Clerk of Superior Court 8/ 29/ 2006
FIN- 2006- 2113 Caldwell County Clerk of Superior Court 8/ 29/ 2006
FIN- 2006- 2136 Gates County Clerk of Superior Court 8/ 17/ 2006
FIN- 2006- 2152 Lee County Clerk of Superior Court 8/ 7/ 2006
FIN- 2006- 2128 Davidson County Clerk of Superior Court 7/ 24/ 2006
FIN- 2006- 3510 Treasurer, Department of the State 7/ 24/ 2006
FIN- 2006- 2102 Alleghany County Clerk of Superior Court 7/ 24/ 2006
FIN- 2006- 2105 Avery County Clerk of Superior Court 7/ 20/ 2006
FIN- 2006- 2194 Watauga County Clerk of Superior Court 7/ 20/ 2006
FIN- 2006- 2180 Rutherford County Clerk of Superior Court 7/ 20/ 2006
FIN- 2006- 4500 Correction, Department of 7/ 20/ 2006
FIN- 2006- 2168 Pamlico County Clerk of Superior Court 7/ 14/ 2006
GRA- 2008- 0053 Review of The Salvation Army Charlotte State Grants 9/ 17/ 2007
GRA- 2008- 0039 Review of Teaching Academics for Life Learning Outreach Ministries State Grant 9/ 13/ 2007
GRA- 2008- 0042 Review of North Hills Child Care Center State Grant 9/ 13/ 2007
GRA- 2007- 0028 Review of Carolyns Little Castle State Grant 9/ 13/ 2007
GRA- 2008- 0049 Review of Life After Life Inc State Grant 9/ 11/ 2007
GRA- 2008- 0048 Review of Appletree Day Care Inc State Grant 8/ 30/ 2007
GRA- 2008- 0046 Review of Infants Palace Day Care Inc State Grant 8/ 23/ 2007
GRA- 2007- 0031 Review of The Kids Place Day Care State Grants 8/ 22/ 2007
GRA- 2008- 0055 Review of Tar Heel Volunteer Rescue Squad State Grants 8/ 17/ 2007
GRA- 2007- 0014 Review of North Carolina Fair Housing Center State Grant 7/ 20/ 2007
GRA- 2007- 0033 Review of Wayne Memorial Hospital State Grants 7/ 19/ 2007
GRA- 2007- 0032 Review of United Community Ministries State Grants 7/ 16/ 2007
GRA- 2007- 0034 Review of Wayne Uplift Resource Association Inc 6/ 22/ 2007
GRA- 2007- 0035 Review of Southeastern Family Violence Center State Grants 6/ 22/ 2007
GRA- 2007- 0036 Review of New Hanover Community Health State Grant 6/ 22/ 2007
GRA- 2007- 0029 Review of Little Angels Child Care Center State Grant 6/ 14/ 2007
GRA- 2007- 0030 Review of Save The Family Child Care State Grant 6/ 14/ 2007
GRA- 2007- 0025 Review of Prosperous Children Child Care 6/ 14/ 2007
GRA- 2007- 0027 Review of Anson County Domestic Violence Coalition Inc 6/ 7/ 2007
GRA- 2007- 0015 Review of Word of God Fellowship 4/ 9/ 2007
GRA- 2007- 0026 Review of Little Red Schoolhouse 3/ 28/ 2007
GRA- 2006- 0010 Review of Windows on the World 3/ 13/ 2007
GRA- 2007- 0021 Review of Blue Ridge Electric Membership Corp 3/ 6/ 2007
GRA- 2007- 0023 Review of Haywood Electric Membership Corp 3/ 6/ 2007
GRA- 2007- 0022 Review of Brunswick Electric Membership Corp 3/ 1/ 2007
GRA- 2007- 0018 Review of Parkwood Volunteer Fire Department 3/ 1/ 2007
GRA- 2007- 0020 Review of Tideland Electric Membership Corp 3/ 1/ 2007
GRA- 2006- 0011 Review of FirstHealth of the Carolinas, Inc 2/ 14/ 2007
GRA- 2006- 0013 Review of Sheltered Aid to Families in Emergencies ( SAFE) 2/ 5/ 2007 38 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Appendix A
GRA- 2006- 0007 Review of Sit In Movement, Inc 11/ 8/ 2006
GRA- 2006- 0008 Review of Bertie- Martin- Washington Community Development 11/ 8/ 2006
GRA- 2006- 0009 Review of Sandhills Mediation Center 11/ 8/ 2006
GRA- 2006- 0005 Review of Hope Pregnancy Care Center 10/ 26/ 2006
GRA- 2006- 0006 Review of Western Youth Network 10/ 26/ 2006
GRA- 2006- 0002 Review of Marine Corp Museum of the Carolinas 10/ 23/ 2006
GRA- 2006- 0003 Review of Club Fifteen 10/ 23/ 2006
GRA- 2006- 0004 Review of Caswell County Parish 10/ 23/ 2006
INV- 2007- 0323 North Carolina Department of Transportation 9/ 12/ 2007
INV- 2007- 0322 East Carolina University 9/ 7/ 2007
INV- 2007- 0321 North Carolina Department of Administration 9/ 4/ 2007
INV- 2007- 0320 North Carolina Department of Transportation 8/ 28/ 2007
INV- 2007- 0319 University of North Carolina at Greensboro 7/ 11/ 2007
INV- 2007- 0318 University of North Caroliina Hospitals/
University of North Carolina School of Pharmacy 6/ 28/ 2007
INV- 2007- 0317 North Carolina Department of Environment and Natural Resources 5/ 31/ 2007
INV- 2007- 0316 NC Department of Environment and Natural Resources/ Division of Waste Management 5/ 10/ 2007
INV- 2007- 0315 Wake Technical Community College 4/ 23/ 2007
INV- 2007- 0314 North Carolina Department of Cultural Resources 4/ 16/ 2007
INV- 2007- 0313 North Carolina School of Science and Mathematics 3/ 7/ 2007
INV- 2007- 0312 Elizabeth City/ Pasquotank Airport Authority 1/ 9/ 2007
INV- 2006- 0311 North Carolina Board of Cosmetic Arts Examiners 12/ 18/ 2006
INV- 2006- 0310 NC Dept of Environment and Natural Resources 11/ 14/ 2006
INV- 2006- 0309 North Carolina State University 9/ 20/ 2006
INV- 2006- 0308 North Carolina Department of Transportation 9/ 13/ 2006
INV- 2006- 0307 NC Department of Administration Division of Purchase and Contract 9/ 5/ 2006
INV- 2006- 0306 North Carolina State University 8/ 28/ 2006
INV- 2006- 0305 North Carolina Public Staff 7/ 19/ 2006
INV- 2006- 0303 North Carolina Agricultural & Technical State University 7/ 6/ 2006
INV- 2006- 0304 North Carolina Department of Health and Human Services 7/ 6/ 2006
ISA- 2007- 6816 Central Carolina Community College 9/ 18/ 2007
ISA- 2007- 6883 Stanly Community College 9/ 18/ 2007
ISA- 2007- 4300 North Carolina Department of Environment and Natural Resources 9/ 17/ 2007
ISA- 2007- 6814 Catawba Valley Community College 9/ 14/ 2007
ISA- 2007- 6864 Randolph Community College 9/ 14/ 2007
ISA- 2007- 6870 Robeson Community College 9/ 14/ 2007
ISA- 2007- 6838 Guilford Technical Community College 9/ 7/ 2007
ISA- 2007- 4410 North Carolina Department of Health and Human Services/
County Administration Reimbursement System 9/ 7/ 2007
ISA- 2007- 4660 Information Technology Services 9/ 4/ 2007
ISA- 2007- 6820 Cleveland Community College 8/ 22/ 2007 39 Increasing Efficiency... Exposing Fraud
North Carolina Office of the State Auditor
ISA- 2007- 6836 Gaston College 8/ 22/ 2007
ISA- 2007- 6861 Piedmont Community College 7/ 20/ 2007
ISA- 2007- 6840 Halifax Community College 7/ 20/ 2007
ISA- 2007- 6874 Rowan- Cabarrus Community College 7/ 18/ 2007
ISA- 2007- 6898 Wilson Technical Community College 7/ 16/ 2007
ISA- 2007- 6843 Blue Ridge Community College 7/ 13/ 2007
ISA- 2007- 6830 Edgecombe Community College 7/ 3/ 2007
ISA- 2007- 4500 North Carolina Department of Corrections 7/ 3/ 2007
ISA- 2007- 6804 Beaufort Community College 6/ 28/ 2007
ISA- 2007- 6088 Fayetteville State University 6/ 1/ 2007
ISA- 2007- 0740 North Carolina Department of Transportation 5/ 22/ 2007
ISA- 2007- 6082 UNC - Pembroke 4/ 23/ 2007
ISA- 2007- 4700 Revenue, Department of 11/ 17/ 2006
ISA- 2007- 4160 Controller, Office of the State 11/ 9/ 2006
ISA- 2007- 1000 North Carolina General Assembly 11/ 2/ 2006
ISA- 2007- 3300 Auditor, Office of the State 11/ 1/ 2006
ISA- 2006- 6086 Elizabeth City State University 7/ 21/ 2006
NGV- 2006- 9110 Mecklenburg Partnership for Children - Financial Statement Audit 7/ 30/ 2007
NGV- 2006- 9101 North Carolina Partnership for Children - Financial Statement Audit 7/ 16/ 2007
NGV- 2006- 9127 Buncombe County Partnership for Children Inc - Financial Statement Audit 6/ 29/ 2007
NGV- 2006- 9128 New Hanover County Partnership for Children Inc - Financial Statement Audit 6/ 28/ 2007
NGV- 2006- 9115 Avery County Partnership for Children Inc - Financial Statement Audit 6/ 26/ 2007
NGV- 2006- 9156 Caswell County Partnership for Children - Financial Statement Audit 6/ 25/ 2007
NGV- 2006- 9173 Pender County Partnership for Children - Financial Statement Audit 6/ 25/ 2007
NGV- 2006- 9133 Stokes Partnership for Children - Financial Statement Audit 6/ 21/ 2007
NGV- 2006- 9126 Alleghany Partnership for Children Inc - Financial Statement Audit 6/ 21/ 2007
NGV- 2006- 9135 Wake County Smart Start Inc - Financial Statement Audit 6/ 14/ 2007
NGV- 2006- 9121 Smart Start of Forsyth County - Financial Statement Audit 6/ 11/ 2007
NGV- 2006- 9140 Bertie County Partnership for Children Inc - Financial Statement Audit 6/ 4/ 2007
NGV- 2006- 9169 Martin- Pitt Partnership for Children Inc - Financial Statement Audit 6/ 4/ 2007
NGV- 2006- 9137 Wilson County Partnership for Children - Financial Statement Audit 5/ 30/ 2007
NGV- 2006- 9153 Bladen County Partnership for Children Inc - Financial Statement Audit 5/ 23/ 2007
NGV- 2006- 9105 Partnership for Children of Cumberland County Inc - Financial Statement Audit 5/ 23/ 2007
NGV- 2006- 9146 Lee County Partnership 5/ 8/ 2007
NGV- 2006- 9179 Scotland County Partnership 2/ 22/ 2007
NGV- 2006- 9134 Surry County Partnership 2/ 21/ 2007
NGV- 2006- 9118 Duplin County Partnership 2/ 21/ 2007
NGV- 2006- 9113 Stanly County Partnership 2/ 19/ 2007
NGV- 2006- 9183 Watauga County Partnership 2/ 19/ 2007
NGV- 2006- 9172 Onslow County Partnership 2/ 19/ 2007
NGV- 2006- 9177 Rockingham County Partnership 2/ 14/ 2007 40 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Appendix A
NGV- 2006- 9125 Wilkes County Partnership 2/ 13/ 2007
NGV- 2006- 9147 McDowell County Partnership 2/ 12/ 2007
NGV- 2006- 9178 Sampson County Partnership 1/ 30/ 2007
NGV- 2006- 9107 Halifax- Warren Partnership 1/ 25/ 2007
NGV- 2006- 9112 Region A Partnership 1/ 25/ 2007
NGV- 2006- 9154 Cabarrus County Partnership 1/ 16/ 2007
NGV- 2006- 9145 Iredell County Partnership 12/ 21/ 2006
NGV- 2006- 9120 Down East Partnership ( Nash, Edgecombe) 12/ 21/ 2006
NGV- 2006- 9116 Catawba County Partnership for Children 12/ 19/ 2006
NGV- 2006- 9106 Davidson County Partnership for Children Inc 12/ 19/ 2006
NGV- 2006- 9131 Robeson County Partnership 12/ 19/ 2006
NGV- 2006- 9149 Rowan County Partnership 12/ 19/ 2006
NGV- 2006- 9141 Columbus County Partnership 12/ 1/ 2006
NGV- 2006- 9123 Albemarle Partnership ( Camden, Currituck, Pasquotank) 12/ 1/ 2006
NGV- 2006- 9114 Ashe County Partnership 11/ 30/ 2006
NGV- 2006- 9142 Children and Youth Partnership for Dare County 11/ 30/ 2006
NGV- 2006- 9148 Moore County Partners for Children and Families 11/ 29/ 2006
NGV- 2006- 9158 Craven County Partnership 11/ 29/ 2006
NGV- 2005- 9157 Chowan- Gates- Perquimans Partnership 7/ 24/ 2006
NGV- 2005- 9167 Lincoln- Gaston County Partnership 7/ 20/ 2006
NGV- 2005- 9185 Yadkin County Partnership 7/ 20/ 2006
NGV- 2005- 9155 Carteret County Partnership for Children 7/ 17/ 2006
NGV- 2005- 9138 Anson County Partnership 7/ 6/ 2006
NGV- 2005- 9101 North Carolina Partnership For Children 7/ 6/ 2006
NGV- 2005- 9130 Randolph County Partnership 7/ 5/ 2006
NGV- 2005- 9150 Alamance County Partnership 7/ 5/ 2006
NGV- 2005- 9104 Cleveland County Partnership 7/ 3/ 2006
PER- 2007- 7226 Enterprise Project Management Office 7/ 26/ 2007
PER- 2007- 7227 State Childrens Health Insurance Program Claims Processing 7/ 24/ 2007
PER- 2007- 7225 New Vistas - Mountain Laurel Inc Mental Health Service Provider 5/ 15/ 2007
PER- 2007- 7219 Office Supplies Term Contract Administered by the Purchase and Contract Division 5/ 9/ 2007
PER- 2007- 7220 Economic Development Studies 5/ 2/ 2007
PER- 2007- 7223 Office of Indigent Defense Services 2/ 28/ 2007
PER- 2006- 7216 Internal Auditing in North Carolina Agencies and Institutions 9/ 28/ 2006
SAR- 2007- 3420 North Carolina Department of the Treasurer 4/ 24/ 2007
SAR- 2007- 6020 UNC - Chapel Hill 4/ 24/ 2007
SAR- 2007- 0673 North Carolina Division of Motor Vehicles 3/ 20/ 2007
SAR- 2007- 6095 UNC Hospitals - NC Memorial Hospital 1/ 25/ 2007
SAR- 2007- 6030 North Carolina State University 1/ 3/ 2007
SAR- 2007- 3600 Justice, Department of 1/ 3/ 2007
SAR- 2006- 6090 North Carolina Central University 10/ 2/ 2006 Increasing Efficiency... Exposing Fraud 41
Appendix B
North Carolina Office of the State Auditor
The OSA independently evaluates the state’s fiscal accountability and public program performance for North Carolina’s citizens and others. The office strives to assure that state government is executing its management responsibilities in compliance with applicable laws, rules, regulations, and policies. The office also evaluates whether sufficient management controls and policies exist to enable state agencies to most efficiently and effectively use public resources.
STATUTORY AUTHORITY
North Carolina General Statutes § § 147- 64.1- 64.14 set forth the duties and responsibilities of the State Auditor, and requires the State Auditor be independent of the organizations being audited. These statutes mandate that all state agencies and entities partially or entirely supported by public funds be subject to audit by the state auditor. These audits independently evaluate public program performance for the General Assembly, Governor, executive departments and agencies, governing bodies, and the general public. Specifically, the State Auditor independently examines and makes findings of fact on whether State agencies:
■ established adequate operating and administrative procedures, reporting systems, and elements of management control.
■ provided financial and other reports that disclose fairly, consistently, fully, and promptly all information necessary to demonstrate program performance.
■ collected, deposited, and properly accounted for all revenues and receipts arising from activities.
■ conducted programs and expended funds in an efficient and economical manner as well as in compliance with applicable laws and regulations
■ determined that programs effectively served the legislative intent.
OSA is also statutorily mandated to conduct certain audits, including the largest audit, the State’s Comprehensive Annual Financial Report ( CAFR). These audits are required to be conducted in accordance with appropriate professional standards.
The Investigative staff is statutorily mandated to investigate allegations of improper activities, which may occur as a result of misfeasance, malfeasance or nonfeasance by governmental employees or those receiving state money. Investigators are required to protect complainants who provide information to OSA related to these charges. This section operates under the supervision of the Chief Deputy State Auditor.
CONSTITUTIONAL AGENCY
The State Auditor is a constitutional officer listed in the North Carolina Constitution under Article III, § 7. The State Auditor is elected statewide every four years and is a member of the Council of State which also includes the Governor, Lieutenant Governor, Secretary of State, State Treasurer, Superintendent of Public Instruction, Attorney General, Commissioner of Agriculture, Commissioner of Labor, and Commissioner of Insurance.
Statutorytatutorytatutorytatutory and Constitutional Authority 42 Increasing Efficiency... Exposing Fraud
Annual Report 2007 | Contact Information
SENIOR MANAGEMENT TEAM
Leslie W. Merritt, Jr., CPA, CFP
State Auditor
Leslie_ Merritt@ ncauditor. net
( 919) 807- 7500
Kris Bailey, J. D.
Chief Deputy
Kris_ Bailey@ ncauditor. net
( 919) 807- 7665
Jeff Henderson, CPA, CISA,
Deputy State Auditor
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
Charles K. Duckett
Personnel Officer
Charles_ Duckett@ ncauditor. net
( 919) 807- 7617
James L. Forteorte
Director of Internal Operations and Legislative Affairs
James_ Forte@ ncauditor. net
( 919) 807- 7642
Cindy Gilliam
Controller
Cindy_ Gilliam@ ncauditor. net
( 919) 807- 7553
Timothy J. Hoegemeyer, J. D., MPA
General Counsel
Tim_ Hoegemeyer@ ncauditor. net
( 919) 807- 7564
Christopher F. Mears, J. D., MPP
Director of Public Affairs
Chris_ Mears@ ncauditor. net
( 919) 807- 7566
Patat Stussie
Executive Assistant to the Auditor
Pat_ Stussie@ ncauditor. net
( 919) 807- 7676
Lenny Supervilleuperville, Ph. D.
Chief Information Officer
Lenny_ Superville@ ncauditor. net
( 919) 807- 7625
AUDIT MANAGEMENT TEAM
Joyce Flowers, CPA
Specialty: Single Audit
Wilmington Branch
Joyce_ Flowers@ ncauditor. net
( 919) 807- 7550
Janet Hayesayes, CPM, CICA, MBA
Specialty: Services to nongovernmen­tal
groups
Janet_ Hayes@ ncauditor. net
( 919) 807- 7558
Linda Hollar, CPA
Specialty: Universities, UNC, UNC Hospitals, Asheville Branch
Linda_ Hollar@ ncauditor. net
( 919) 807- 7565
Frank L. Perryerry
Specialty: Investigations
Frank_ Perry@ ncauditor. net
( 919) 807- 7604
Lee Linker, CPA
Specialty: Quality Control
Lee_ Linker@ ncauditor. net
( 919) 807- 7583
Davidavid Nance, CPA
Specialty: Health Issues
David_ Nance@ ncauditor. net
( 919) 807- 7660
Carol Smith, CPA
Specialty: Community Colleges
Charlotte Branch
Greensboro Branch
Morganton Branch
Winston- Salem Branch
Carol_ Smith@ ncauditor. net
( 336) 585- 2513
Fayeaye Steele, CPA
Specialty: Clerks of Court
North Carolina State University
Fayetteville Branch
Greenville Branch
Edenton Branch
Faye_ Steele@ ncauditor. net
( 919) 807- 7589
Kenneth Barnette, CPA
Specialty: Performance Audits
Kenneth_ Barnette@ ncauditor. net
( 919) 807- 7540
Charles Williford, CPA, CITP, CISA, CFE, CPM
Specialty: Information Systems Audits
Charles_ Williford@ ncauditor. net
( 919) 807- 7627
Copies of reports issued by the Office of the State Auditor may be requested through the email link on the web site at www. ncauditor. net or by calling the main phone number. Other inquiries, comments, and suggestions may be made by contacting the main office or one of the staff members listed below.
N. C. Office of the Statetatetate Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
Contact Information Northorthorthorth Carolinaarolinaarolinaarolinaarolinaarolinaarolina Officefficefficefficeffice ofof thethethe Statetatetatetate Auditoruditoruditoruditoruditoruditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
OSA printed this report in- house as a cost saving measure for taxpayers.